Financial markets are looking mixed as traders brace for the FOMC decision later this week while Chinese banks are still closed for the Mid-Autumn Holidays.

So far, the U.S. dollar is edging close to year-to-date lows while gold is hovering near its all-time highs.

Check out the latest headlines driving the markets:

Headlines:

• Chinese data points released on Saturday turned out mostly downbeat:
  • Industrial production for August: 4.5% y/y (4.7% expected, 5.1% previous)
  • Retail sales slipped by another 2.1% y/y (vs 2.5% expected) in August after a 2.7% decline in July
  • Fixed asset investment up by 3.4% ytd/y in August (3.5% expected, 3.6% previous)
  • Unemployment rate edged higher from 5.2% to 5.3% in August
• Over the weekend, another assassination attempt was made on former President Trump in Florida
• Russian President Putin ordered the army to boost the number of troops 180,000 to 1.5M
• BOC Governor Macklem reiterated willingness to lower rates faster if downside risks grow
• New Zealand BusinessNZ services index improved from 45.2 to 45.5 in August; July’s reading revised higher from 44.6; Employment rose to its highest since March
• Israel’s Prime Minister Netanyahu issued a warning to Yemen’s Houthis after they fired a missile into the country on Monday
• Swiss PPI for August: 0.2% m/m (0.1% expected, 0.0% previous)
• Rightmove: U.K. average new seller asking prices rose 0.8% m/m in September after a 1.5% dip in August
• ECB chief economist Philip Lane mentioned that the central bank should keep cutting interest rates gradually
• Euro area international trade in goods surplus in July was €21.2B vs. €6.7B in July 2024; exports of goods to the rest of the world increased by 10..2% y/y while imports rose 4.0% y/y
• Canadian manufacturing sales in July: 1.4% m/m vs. 1.7% m/m in June
• Chinese banks still closed in observance of Mid-Autumn Festival

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Majority of asset classes saw subdued volatility at the start of this trading week, as Chinese markets were closed for the Mid-Autumn Festival.

Bitcoin and the U.S. dollar cruised lower throughout the day while gold traded close to its record highs, with investors likely playing it safe ahead of the FOMC decision. Even U.S. equity indices ended on a mixed note, as the Dow and S&P 500 closed in the green while the Nasdaq ended 0.47% lower.

Crude oil was an exception, however, as the commodity started off in the red, probably digesting the downbeat Chinese data points released over the weekend and their impact on global demand. However, the energy commodity soon pulled higher on geopolitical tensions, as Israel issued a strong warning to the Houthis after the rebels fired a missile on the country.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

It’s a different story in the forex market, as volatility was in play the entire day, with the U.S. currency off to a rocky start against its peers.

Although Japanese markets were on holiday on Monday, USD/JPY went on to tumble to its lowest level in 12 months, only pulling higher after the Empire State manufacturing index turned out significantly stronger than expected.

USD/CAD also popped higher after the release, with the Loonie barely able to take advantage of anti-dollar moves and crude oil rallies likely due to another set of dovish remarks from BOC Governor Macklem over the weekend.

The dollar soon resumed its downward trajectory against most of its counterparts, particularly the Aussie, Kiwi, and pound, dragging the U.S. dollar index close to its year-to-date lows.

Upcoming Potential Catalysts on the Economic Calendar:

• German and eurozone ZEW economic sentiment index at 9:00 am GMT
• Canada’s CPI report at 12:30 pm GMT
• U.S. retail sales data at 12:30 pm GMT
• U.S. industrial production and capacity utilization at 1:15 pm GMT
• FOMC member Logan’s speech at 2:00 am GMT
• New Zealand GDT dairy auction coming up
• Japanese core machinery orders and trade balance at 11:50 pm GMT

We’ve got a couple of major market movers on deck today, namely Canada’s inflation figures and the U.S. retail sales report.

Better keep an eye out for further Loonie weakness if the CPI readings fall short of estimates and underscore the dovish BOC bias. And make sure to account for potential shifts in Fed rate cut expectations based on Uncle Sam’s consumer spending data.

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