The U.S. dollar edged higher on Wednesday, snapping a two day losing streak as traders positioned cautiously ahead of the Federal Reserveâs much anticipated policy announcement. Expectations have solidified around a quarter point rate cut, but uncertainty remains over how the Fed will guide markets on the path ahead. With officials increasingly divided on the pace and scope of future easing, investors are looking for any signal from Chair Jerome Powell on whether the central bank is nearing the end of its tightening cycle.
Market Bets Grow on End to Quantitative Tightening
Market sentiment improved slightly as speculation mounted that the Fed could halt its balance sheet reduction program sooner than expected  possibly within the month. Such a move would signal a shift toward a more accommodative stance and could ease liquidity strains that have weighed on risk appetite. Traders view the decision as pivotal for shaping global asset flows through the remainder of the year.
Oil Extends Slide on Oversupply Fears, Gold Recovers Modestly
In commodities, oil prices held near a three day low amid growing signs of oversupply and weaker than expected demand indicators from key consuming nations. Meanwhile, gold managed a modest rebound after three consecutive sessions of declines, as some investors sought refuge ahead of major central bank decisions. The metalâs advance, however, remained limited by a firmer dollar and a cautiously optimistic tone in broader markets.
TrumpâXi Talks Offer Hope of Reduced Trade Tensions
Geopolitical focus shifted to Washington, where U.S. President Donald Trump said he expects to reduce tariffs on Chinese goods related to the ongoing fentanyl dispute. Trump suggested the 20% levy could be cut in half, to 10%, signaling a possible easing of trade frictions ahead of his Thursday meeting with Chinese President Xi Jinping. The two leaders are expected to discuss technology exports, including restrictions on Nvidiaâs chip sales, in what markets see as a key step toward stabilizing relations between the worldâs largest economies.
Market Outlook: Policy Cues and Diplomacy in the Spotlight
With both monetary policy and geopolitics dominating the agenda, global markets are entering a decisive 48 hour window. Traders are preparing for heightened volatility as the Fedâs tone and the outcome of the TrumpâXi meeting could jointly redefine near term market direction. For investors, this weekâs developments are not just routine  they are critical in determining whether the recent calm in markets holds or gives way to renewed turbulence.
Disclaimer: This report is for informational purposes only. It does not constitute investment advice or represent the official views of any central bank or regulatory body.