U.S. Stocks Pause Ahead of Fed Decision; Dollar Hits Three-Year Low

Market Overview

On the eve of the Federal Reserve‘s highly anticipated rate decision, market sentiment turned cautious and the recent strong rally in U.S. equities paused. Both the S&P 500 and the Nasdaq pulled back from record highs, ending the Nasdaq’s six-day winning streak.

Following the release of U.S. retail sales data, Treasury yields briefly spiked before resuming their downward trajectory, marking a second straight day of declines. In foreign exchange, the U.S. Dollar Index dropped for a second consecutive session, touching a three-year low. The euro surged 1% intraday to a four-year high, while the offshore yuan strengthened past 7.11 to a 10-month high.

In crypto markets, Bitcoin jumped more than $2,000 intraday, approaching the $117,000 mark. Commodities remained hot: crude oil extended a three-day winning streak to reach a two-week high, with WTI crude rising more than 2% intraday. Gold notched a second consecutive record intraday high, with spot prices breaking above the $3,700 level for the first time in history.

Key Events Ahead

U.S. August Retail Sales Beat Expectations

Retail sales rose 0.6% MoM in August, beating forecasts for the third consecutive month.

Gains were driven by back-to-school shopping, with online retail, apparel, and sporting goods leading the way.

Inflation-adjusted retail sales increased 2.1% YoY, marking the 11th straight month of positive growth.

Strong wage gains and wealth effects from the stock market continue to support consumer spending, potentially complicating the Feds rate-cut deliberations.

Trump Signals Possible Trade Concessions

During his U.K. visit, Trump hinted at flexibility on trade, with a $10+ billion economic package expected to be announced.

Deals include new technology investments, defense and nuclear energy agreements, and expanded financial cooperation.

Nvidia‘s and OpenAI’s CEOs are slated to join a business roundtable Thursday at the U.K. Prime Ministers country residence.

The U.K. government indefinitely shelved plans to fully remove tariffs on U.S. steel exports.

Data to Watch (GMT+8)

20:30U.S. August Housing Starts (annualized, thousands)

20:30U.S. August Building Permits (thousands)

22:30U.S. EIA Weekly Crude Oil Inventories (to Sept 12, million barrels)

02:00 (overnight)FOMC Interest Rate Decision & Summary of Economic Projections

02:30 (overnight)Fed Chair Powell Press Conference