For European traders who thought that the Fed would cut interest rates by 25 basis points next week on Thursday evening, Friday (September 13th) may bring some surprises.

With news of the possibility of the Fed cutting interest rates by 50 basis points, the probability of this expectation has returned to a nearly 50-50 status.

The situation began with independent reports from the Financial Times and The Wall Street Journal, both of which stated that the decision on September 18th is still "a critical choice". Subsequently, former New York Fed Chair William Dudley said at an event in Singapore that the Fed has "sufficient reasons" to cut interest rates by 50 basis points.

This news has put pressure on the US dollar, with the USD/JPY exchange rate approaching its lowest level of the year and further weakness in the EUR/USD exchange rate. The 2-year US Treasury yield fell below 3.6% during the Asian trading session.

The price of gold has been pushed up to a record high of $2,570 per ounce. Gold prices have risen nearly a quarter this year, supported by expectations of loose monetary policy from the Fed. Central bank gold purchases and strong safe-haven demand due to conflicts in the Middle East and Ukraine have also driven the rise in gold. In addition, interest from retail investors is also increasing.

Unwinding of short positions in gold by investors may also contribute to the rise in gold. The latest data shows that as of the week ending September 3rd, the short positions in Comex gold futures reached their highest level in four weeks.

Chris Weston, Research Director at Pepperstone Group Ltd, said, "Currently, gold is being used more as a hedge tool in portfolios." He pointed out that the weak labor market report on Thursday suggests that fund managers may view gold as a safe haven to hedge against downside risks to the US economy, further driving up the price of gold.

The stock market reaction was varied. The Hang Seng Index in Hong Kong rose by over 1%, and the Australian stock market also rose. However, a decline in the Nikkei Index is almost inevitable due to the strengthening of the yen. The South Korean stock market also declined, and the mainland Chinese stock market performed weakly. It is worth noting that all three markets will have a long holiday, and South Korean traders will not return to their positions until next Thursday.

Major stock indexes in Europe opened collectively higher, with the Euro Stoxx 50 index up 0.13%, the German DAX30 index up 0.26%, the French CAC40 index up 0.08%, and the UK FTSE100 index up 0.03%.

Friday's european data schedule is relatively light, with the market focus continuing to revolve around the fed's interest rate cut expectations. As the likelihood of a 50 basis point rate cut increases from 28% in the early asian session to 43%, cpi data for france and greece are being released one after another, and eurozone industrial production data is also about to be released.

Key market dynamics for Friday include:

France, Greece, Poland, Slovakia August CPI

Eurozone July industrial production data