Week Ahead: Fed Rate Cut Expectations Shift After US CPI

Key Takeaways

• XAUUSD, BTCUSD, USDX and SP500 enter the week driven by Fed rate cut expectations after a softer US CPI print and a mixed Jobs report.
• Headline CPI cooled to 2.4% year on year, while job gains came in at 130,000 with heavy downward revisions to prior data. Markets now price the first Fed rate cut around June.
• If inflation continues to cool, XAUUSD could extend gains. If data reaccelerates, USDX may squeeze higher and pressure both gold and crypto.

US CPI and Fed Rate Cut Expectations

The macro backdrop for the markets this week is a tug-of-war between softer headline inflation and sticky core inflation.

January US CPI slowed to 2.4% year on year, undershooting the 2.5% forecast and stepping down from 2.7% in December. Energy helped, with weaker gasoline prices pulling the headline index lower.

Under the surface, the story is less comfortable. The Fed’s preferred PCE gauge for December still sits at 2.9% year on year, with core PCE running at 3.0%. Services and essential costs remain elevated, which keeps policymakers wary of cutting too quickly.

Labour data sends a similar mixed message. January Non-Farm Payrolls came in at 130,000 versus expectations around 70,000, and well above the revised 48,000 in December.

At the same time, earlier benchmark revisions revealed that employment levels through 2025 were overstated, which fits with VT Markets research on the quiet weakening in the jobs market.

Fed minutes and recent commentary reinforce a cautious stance. Officials describe progress toward the 2% target as uneven and stress that rate cuts will depend on, while some still float the risk of further hikes if inflation stalls.

Fed funds futures and FedWatch tools now price a high chance of steady rates through the March meeting, with the market leaning toward the first cut around mid 2026 rather than early in the year.

The Tariff Twist

A major shift arrived after the US Supreme Court ruled that only Congress, not the President, can impose global tariffs.

The decision wipes out a major executive power tool and may trigger roughly 160 billion dollars in refunds to importers.

For markets, this creates two effects:

• USDX impact: A reversal of tariff inflows can weigh on the dollar if importers unwind prior hedges.
• SP500 effect: Lower effective import costs can cushion corporate margins and improve forward expectations.

However, the White House is already exploring a 150-day Emergency Surcharge as a stopgap measure. Traders will watch whether the plan survives legal challenge.

Rising US–Iran Tensions and the Geneva Deadline

Washington issued a 48-hour ultimatum to Iran, demanding acceptance of a revised framework ahead of Thursday’s meeting in Geneva.

The US has positioned carriers in the region, and while Iran states there will be no surrender, talks have not collapsed.

This matters directly for XAUUSD and oil:

• Higher geopolitical risk feeds haven demand and supports XAUUSD above 5,000.
• If talks break down, traders may price a spike in crude and bid USDX temporarily.

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Key Symbols to Watch

Gold (XAUUSD) | USDX | Bitcoin (BTCUSD) | S&P500 | Oil (CL-OIL)

Chart Movements of the Week

Gold (XAUUSD)

• XAUUSD climbed to around $5,170 in early Asian trading on Monday, approaching 61.8% Fibonacci resistance at 5164.35.
• 5164.35 remains key rejection zone, with 4981.20 acting as 50% support.
• Catalyst: Fed rate cut expectations and upcoming US inflation data.

Bitcoin (BTCUSD)

• BTCUSD rejected $65,000 and stabilised near $62,000.
• $59,500 support critical for structure.
• Catalyst: US inflation and SP500 reaction.

US Dollar Index (USDX)

• USDX testing 98.10 resistance zone.
• 98.65 breakout shifts momentum bullish.
• Catalyst: Fed rate cut expectations and PPI.

SP500

• SP500 is trading around 6,912, which aligns exactly with the 38.2% retracement.
• Immediate resistance sits at 6,944 at the 23.6% retracement, where sellers may react.
• Deeper support sits at 6,860, which is the 61.8% retracement zone.

Bottom Line

Gold enters the new week pressing into the 61.8% Fibonacci resistance at 5164.35, with XAUUSD trading just beneath that key ceiling. The next directional move will likely hinge on Fed rate cut expectations and incoming US inflation data.

With US PPI and follow-up labour data ahead, markets are recalibrating the timing of the first Fed rate cut. If inflation continues to cool, XAUUSD could extend its recovery.

If price pressures reaccelerate, the dollar may strengthen and cap gold’s upside. The coming week will revolve around whether rate cut expectations gain conviction or face another reset.

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