The Fed’s red carpet turns into a runway

Wall Street this week felt like a “theatre of the doves” where every cue was perfectly timed: the PPI rolled out the red carpet, and CPI turned it into a full-blown runway show for Powell to stride toward rate cuts. Inflation came in tame—not slain, but tamed enough that nobody in the audience feared the beast would break its chains. And then, almost on cue, jobless claims spiked to their highest in four years, a reminder that the real story is less about prices and more about a labour market starting to fray. The curtain lifted, the music swelled, and traders rushed to bid stocks to fresh records, while Treasury yields briefly dipped below 4% as if bowing to the inevitable.

What was once a balancing act between inflation and job creation has tipped into one-way production. The hawks have retreated into the rafters, the doves have taken center stage, and the mandate looks rewritten. After the payroll revisions gutted past job strength and recent NFPs came in limp, the Fed’s performance is no longer a question of “if” but “how fast.” This isn’t choreography improvised on the fly—it’s a script already in rehearsal.

The dollar traded like a stand-in, a proxy for the Fed’s rate cut tempo. Yes, it slipped, but within the same confines it’s been chained to all week. Its moves are less about independent conviction and more about how aggressive Powell might be with the cuts. Outside the U.S., the divergence sharpens the plot: the ECB has taken its bow and claimed the job is done, though tariffs or China’s deflation could pull them back for an encore, while the BoJ hints at raising rates, a plot twist that leaves USD/JPY eyeing the 146 handles.

Meanwhile, gold has stolen the encore, surging past its inflation-adjusted 1980 high. With yields retreating and inflation refusing to roar, the metal feels less like a hedge and more like an understudy suddenly thrust into the limelight. It’s performing not just as a store of value but as a store of credibility in a world where central banks are rewriting scripts mid-show.

And just as Powell’s stage directions dominate one side of the play, artificial intelligence is rewriting the narrative arc of technology altogether. Oracle—a veteran actor many thought relegated to supporting roles—suddenly surged 36% after signing massive AI-driven cloud contracts. Analysts, supposedly with the playbook in hand, were caught flat-footed as if their valuation models belonged to a bygone era. AI isn’t just another subplot; it’s mythology in the making, where growth is non-linear and the old formulas collapse under forces markets haven’t learned how to model.

The curtain now rises on an easing cycle, a dollar fortress with bricks crumbling one by one, gold rewriting its own legacy, and AI refusing to stay within the confines of spreadsheets. Every act flows into the next like a production rehearsed to perfection. But markets know the danger of overconfidence—when expectations of a flawless performance build, even a single missed line can turn applause into stunned silence.