Countdown to Crucial Fed Decision Amid Market Jitters

Traders are anxiously anticipating the Federal Reserve's imminent rate decision, speculating on a possible major cut despite strong U.S. retail sales data. Market positions vary, with the dollar weakening and short-term U.S. Treasury yields rising. European markets predict slight declines as the Fed meeting approaches.

As the clock ticks down to one of the most eagerly awaited Federal Reserve decisions, traders remain divided on the likelihood of a super-sized rate cut.

The U.S. retail sales figures released on Tuesday showed an unexpected rise, briefly dampening hopes for a 50-basis-point cut to launch the Fed's easing cycle. However, market sentiment quickly rebounded, with futures-implied probabilities settling at around 65% during the early Asian session.

Market reactions are mixed: the dollar has weakened, especially against the yen, while short-term U.S. Treasury yields are climbing. European equity futures signal minor losses ahead of the Fed's announcement, set for 1800 GMT. Despite robust U.S. consumer health, a modest 25-basis-point cut may be more likely, given the economic context.

(With inputs from agencies.)