The US dollar is weakening across most global currencies today, as speculation grows that the Federal Reserve might consider a 50 basis point (bp) rate cut at next week’s FOMC meeting. In the derivatives market, the odds for this cut have risen to their highest level in weeks. Lower interest rates and a declining dollar have pushed gold to a new record high of nearly $2,573. Meanwhile, October WTI crude is trading strongly at the upper end of yesterday's range, having surged from around $65 earlier this week to nearly $70 today.

Asia Pacific Markets
Japan’s final estimate for July industrial output confirmed a recovery, showing a 3.1% increase after June's sharp 4.2% drop. This revision from the initial 2.8% estimate reflects stronger-than-expected performance. The Bank of Japan (BOJ) meets next week amid growing speculation of a Fed rate cut. As US rates fell, the dollar hit a new low against the Japanese yen, trading near JPY 140.40 today. The Australian dollar also reached a new weekly high, slightly above $0.6730.

European Markets
The European Central Bank (ECB) delivered a widely expected rate cut yesterday, shifting attention to next week’s FOMC meeting. The euro strengthened throughout the North American session, reaching $1.1075 and surpassing a key retracement level.
After bouncing back on Wednesday, the British pound climbed above $1.3120 and continued rising, probing the $1.3150 area today.

American Markets
Speculation about a potential 50 bp rate cut by the Fed next week has been fueled by a news report from a source considered close to Fed officials, as well as comments from several former officials who suggested they would support a half-point reduction. Low PPI components were also seen as reinforcing the likelihood of a softer PCE deflator.
While today’s import/export prices and the preliminary results of the University of Michigan’s September survey are not expected to significantly alter these expectations, the Canadian dollar remains the only G10 currency that failed to gain against the US dollar yesterday.