Markets Slip as Dollar Hits Four-Year Low Ahead of Fed Rate Decision

Investors pared gains and the dollar slid to its weakest against the euro in four years on Tuesday as traders braced for the Federal Reserve’s interest rate decision due Wednesday in Washington.

The buildup to the Fed’s two-day policy meeting underscores growing caution, with markets pricing in a near-certain quarter-point rate cut to a 4.00-4.25% range this week.

Market Movements Stocks wavered in choppy trading, with the S&P 500 dipping 0.13%, the Nasdaq off 0.07% and the Dow sliding 0.27%. U.S. retail sales data for August surprised to the upside but failed to shift the outlook that policymakers will act to ease borrowing costs.

Fed Expectations

• A 25-basis-point cut is fully priced in, with CME FedWatch showing roughly a 96% probability.
• A larger 50-basis-point move retains only a slim 4% chance, according to futures markets.

Dollar Weakness The greenback tumbled across the board, hitting a four-year low against the euro, as investors ramped up wagers on imminent Fed easing.

Political and Economic Pressures Traders noted the Fed faces conflicting signals: a cooling labor market argues for cuts, while tariff-induced inflation pressures counsel caution. Meanwhile, recent confirmations and court rulings around new and embattled Fed governors inject added uncertainty into the debate.

With Fed Chair Jerome Powell’s press conference set for Wednesday afternoon, markets remain on edge for guidance on the pace of future rate cuts into 2026.