The dollar weakened, equities dipped, and gold hit record highs

The dollar weakened, equities fell, and gold set new records on Wednesday as investors waited for a Fed rate cut later in the day.

A day earlier, the euro’s rise showed the change in sentiment. It touched a four-year high versus the dollar as traders bet on Fed easing. Oil held firm after Ukrainian drone strikes on Russian refineries and ports kept supply risks in view.

The Fed is widely expected to cut its benchmark by 25 basis points to 4.00%–4.25% when the meeting ends. After the decision, investors will focus on Chair Jerome Powell’s outlook for policy and how officials balance inflation gains with growth risks according to Reuters.

“Markets are effectively daring the Fed to over-deliver on the dovish side,” said Dilin Wu, research strategist at Pepperstone.

“The bigger question, though, is whether Powell can satisfy markets already leaning heavily on a dovish view, or whether conditions are ripe for a near-term shakeout in both USD and gold positioning.”

Dollar struggles to recover from earlier slide

After Tuesday’s steep slide, the dollar only edged back. The dollar index, which measures the currency against major peers, rose 0.1% to 96.689, recouping a sliver of the prior day’s 0.7% fall that had marked the lowest since early July.

The euro dipped 0.1% to $1.1857 after hitting $1.1867 on Tuesday, the strongest since September 2021. The dollar held at 146.52 yen, barely changed after a 0.6% drop the previous day.

“If the (Fed) chair is more dovish than expected, of course, you would expect that to weigh on the dollar, but really, how much more bearish can you get from here?” said Mahjabeen Zaman, head of foreign exchange research at ANZ, on a podcast. “We’ve already got more than five cuts priced in for the cycle.”

In Washington, Stephen Miran took the oath on Tuesday morning after a narrow Senate confirmation to the Fed’s Board of Governors. In a separate case, a U.S. appeals court refused to let President Donald Trump remove Governor Lisa Cook.

Asian stocks eased after a weak Wall Street finish. MSCI’s gauge of Asia-Pacific shares outside Japan fell 0.2%. Japan’s Nikkei lost 0.1% after a record close on Tuesday.

Futures signaled a steadier open in Europe and the United States after a soft cash session. Euro Stoxx 50 futures were up 0.35%, DAX futures gained 0.4%, and FTSE futures added 0.2%. In the U.S., S&P 500 e-minis rose 0.1%.

Gold prices stay strong as investors seek safety

The Bank of Canada is also expected to cut rates on Wednesday as the labor market softens and trade frictions persist. New figures from Japan showed exports down for a fourth straight month in August, as reported earlier by Cryptopolitan. It highligted the drag from broad tariffs put in place by the Trump administration.

Oil eased but stayed supported. Brent fell 14 cents, or 0.2%, to $68.33 a barrel by 0405 GMT, while U.S. West Texas Intermediate slipped 13 cents, or 0.2%, to $64.39.

Supply worries persisted after Transneft, Russia’s pipeline operator, warned producers they might have to cut output following recent drone strikes on key facilities, three industry sources said.

Gold kept rising. Spot bullion edged up to $3,690.32 per ounce after topping $3,700 for the first time in the prior session, showing firm haven demand before the Fed decision.