Dollar Weakens and Stocks Stall as Gold Rises Ahead of Fed Decision

• Fed likely cuts rates 25bps; markets await Powell’s dovish signals.

• Dollar steady near lows; euro at $1.1857; Asia shares down 0.2%; U.S. futures up 0.1%.

• Oil steady at 64.49; gold above 3,690; Canada rate cut expected; Japan exports fall.

On Wednesday, global markets saw the dollar weaken, shares dip slightly, and gold rise to new highs as investors prepared for the Federal Reserve’s anticipated interest rate cut later in the day. The Fed is expected to lower its benchmark rate by 25 basis points to a range of 4.00%-4.25%. Attention centers on Chair Jerome Powell’s remarks regarding the future path of U.S. monetary policy, as markets hope for a dovish stance.

According to Dilin Wu, research strategist at Pepperstone, the market challenges the Fed to take a more accommodative approach but questions remain whether Powell can meet these expectations or if volatility is likely in dollar and gold positions.

The U.S. dollar index inched up 0.1% to 96.689 after a 0.7% drop on Tuesday, marking its lowest level since early July. The euro hovered near a four-year peak, trading at $1.1857 after reaching $1.1867 on Tuesday, the highest since September 2021. The dollar was largely steady against the Japanese yen at 146.52, following a 0.6% decline in the prior session.

Mahjabeen Zaman from ANZ noted that markets have already priced in more than five rate cuts, making further dollar weakness limited. 

Meanwhile, MSCI’s Asia-Pacific ex-Japan index fell 0.2%, Japan’s Nikkei slipped 0.1% after a record close the previous day, and U.S. futures showed modest gains with S&P 500 e-minis up 0.1%. European futures also advanced alongside a softer cash market.

Oil prices remained firm amid ongoing tensions, with U.S. crude slipping slightly by 0.05% to $64.49 per barrel after a three−day rally. 

Russian pipeline operator Transneft warned of potential production cuts linked to Ukrainian drone strikes on key refineries and ports, according to industry sources.

Meanwhile, gold maintained its upward trajectory, slightly rising to $3,690.32 per ounce after surpassing $3,700 for the first time in the previous session. The Bank of Canada is also expected to reduce rates on Wednesday in response to a weakening labor market and trade disputes. Japan’s export data showed a decline for the fourth consecutive month in August, highlighting the economic impact of tariffs imposed by the Trump administration.