As former President Donald Trump prepares to debate U.S. Vice President Kamala Harris later on Tuesday, financial markets are closely watching whether the Federal Reserve will opt for a significant rate cut at its upcoming meeting. The uncertainty surrounding the Fed’s next move has lent some support to the U.S. dollar, which has clawed back gains amid shifting expectations. This week, attention is increasingly shifting away from the economic trajectory toward the upcoming U.S. elections, a factor that is also likely bolstering the dollar.
On Wednesday, all eyes will be on a key U.S. government report expected to show a 2.6% year-over-year rise in the Consumer Price Index (CPI) for August, marking the smallest increase since 2021, according to the median forecast of economists. With the Fed in its traditional blackout period ahead of the September 17-18 meeting, the CPI data could prove pivotal. A weaker-than-expected CPI print might push the Fed toward a more aggressive 50 basis-point cut, while a stronger reading could solidify the case for a more measured 25 basis-point reduction.
Meanwhile, economic data from China continues to capture market interest. The Customs General Administration of China reported an 8.7% year-over-year increase in August exports, surpassing expectations of a 6.6% rise. However, despite robust commodity imports ahead of the peak consumption period in the fall, overall imports grew by just 0.5%, leaving a substantial trade surplus of $91 billion for the month. Industrial commodities remain under pressure as tepid Chinese demand and growing concerns about global economic growth weigh on sentiment.
In the commodities market, oil prices edged lower following a brief gain, reflecting the return of a risk-on tone in broader markets. Gold, which saw a slight advance earlier, also retreated as traders await the U.S. inflation data. Bitcoin, meanwhile, fell below $57,000, adding to the mix of market volatility as participants navigate an increasingly complex economic landscape.