ASX 200 and US equities rise as Federal Reserve signals rate cuts

(AI video summary)

This video was created on 29 August for IG audiences by ausbiz.

US equity markets surge

United States (US) equity markets continue to climb, with the US Tech 100 (Nasdaq) nearing 22,000 and the US 500 (S&P 500) closing above 6500 for the first time. These gains follow a dovish shift by Federal Reserve (Fed) Chair Jerome Powell, raising expectations for an interest rate cut in September.

Upcoming inflation figures are crucial for confirming this trajectory, with non-farm payrolls indicating a potential rise in unemployment to 4.3%.

ASX 200: gains and caution

In Australia, the Australia 200 (ASX 200) is up over 3% in August, marking its fifth consecutive month of gains. Strong performances in the materials sector, especially from big miners like Mineral Resources, which surged nearly 30%, have driven this growth. The index remains strong above 8800, though overbought conditions signal caution.

Aussie dollar rally supported by PCE

The Australian dollar has strengthened to a two-week high of about $0.6530, fuelled by Powell's dovish pivot and local inflation data. If core personal consumption expenditures (PCE) inflation hits the forecasted 2.9%, the Aussie dollar might rise toward $0.6625 and possibly reach $0.67.

Commodities

• Crude oil: is on a second week of gains amid geopolitical tensions, supported by expected Fed rate cuts. Technical resistance around $64 - $65 per barrel remains a barrier, but prices could edge toward $67.50 or even $70 if surpassed.
• Gold: is approaching resistance at $3428 per ounce and could climb to $3500 or beyond with a PCE confirmation.

Bitcoin stabilises, eyes targets

Bitcoin, often seen as 'digital gold', is stabilising after reaching $125,000. Inflation data is critical, with any positive breakout potentially targeting $150,000. Bitcoin must hold support around $109,000 to challenge previous highs.