The financial markets remain focused on the possibility of a 50 basis point (bps) rate cut by the Federal Reserve this Wednesday, driven by speculation that officials may have strategically leaked information to keep the option on the table. Recent jobs data and inflation figures had led many to believe the Fed would ease off aggressive rate cuts, but now Fed funds futures are pricing in about an 80% chance of a half-point cut. Additionally, there’s an 80% probability of another 50 bps reduction later this year. This renewed dovish outlook has weighed on the U.S. dollar, stalling the recent technical rebound following last month's decline.
Commodities, meanwhile, have responded to the weakening dollar. Gold, benefiting from both the softer greenback and lower interest rate expectations, hit a record high, nearing $2,590. In energy markets, November WTI crude is trading slightly higher around $68.20, despite closing near session lows last Friday.

Asia-Pacific Markets
Japan's markets were closed today in observance of Respect-for-the-Elderly Day, and they will remain closed next Monday for the Autumn Equinox. Chinese markets are also closed for the Mid-Autumn Festival today and tomorrow. The key regional event this week is the Bank of Japan’s policy meeting, though no major policy changes are expected. However, the central bank’s hawkish bias is likely to be reiterated.
In recent weeks, the U.S. dollar has slid from JPY 152 to around JPY 140.25. Elsewhere, the Australian dollar rebounded to $0.6745 today.

European Markets
After last week’s ECB rate cut, the eurozone takes a backseat this week. Key central bank meetings are scheduled for Norway’s Norges Bank and the Bank of England, but neither is expected to alter policy.
The uncertainty around the Fed’s decision has helped bolster the euro. The British pound, meanwhile, found renewed support after touching $1.3150, its highest level in five days.

American Markets
Market participants have aligned their expectations around the Fed's upcoming decision, with the probability of a 50 bps cut solidified following the latest CPI report. The derivatives market is now pricing in a total of 120 bps in rate cuts across the three remaining Fed meetings this year. This suggests at least one 50 bps cut is all but certain, with an 80% chance of another half-point reduction to follow.