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In what felt like a mini rollercoaster ride, the S&P 500 pulled off an impressive feat on Tuesday, defying the usual September gloom to notch a second consecutive win. Still reeling from Friday's volatility, investors scrambled to find their footing amid mounting growth fears and last-minute repositioning ahead of a pivotal moment in the presidential campaign and the release of critical economic data. The markets swung like a pendulum, while oil prices, caught in the crossfire of global economic worries, plunged to their lowest point since December 2021—a wild ride, no doubt, and one that's far from over.

Tuesday night's ( Wednesday Morning in Asia) face-off between Vice President Kamala Harris and former President Donald Trump could rattle the market's cage if it definitively shifts the narrative on the November election. Investors will be tuned in, popcorn in hand, as they look for any hints of what's next.

As for Wednesday's inflation report, this could be the spark that lights the fuse for next week's Federal Reserve decision. While the safe bet is on a modest quarter-point rate cut, recent signs of economic wobble have prompted whispers of a bigger move.

Frankly, outside of some bottom fishing, the lead-up to Wednesday's US CPI release has been more of a snooze fest than a market spectacle. But don't blame the traders for the lack of excitement—it's not about CPI anticipation. We're all in a holding pattern, waiting for the September FOMC to roll around. The real fireworks will likely occur after the first-rate cut, then the colossal shuffle begins.

After the whirlwind of recent market volatility and the unwinding of the yen carry trade, investors have turned their gaze toward the burning question: soft landing or full-blown recession? Will the Federal Reserve's easing cycle be a smooth, controlled descent, or are we heading for a fast-and-furious, panic-driven acceleration? There's still a school of thought that Powell might reach into his monetary hat and pull out a surprise 50-basis-point cut. The call might be closer than market odds are pricing, and Powell might be the wildcard that flips the entire narrative. Buckle up because this high-stakes game isn't over yet.

And oil? It's the ultimate crystal ball for global growth—an economic gauge that touches every sector daily. You can bet the Fed is watching closely.

Oil is in a tailspin, with Brent crude slicing through the $70 per barrel threshold like a hot knife through butter. What's driving this plunge? A trifecta of troubles: China drowning in deflation, the U.S. bracing for a labour market cooldown, and Germany limping through a slow-burn recession. Add to that an oversupply from non-OPEC producers, and it's no surprise that oil is spiralling downward.

The latest spark was OPEC's decision to dial back its rosy demand outlook. They expect oil demand to grow by around 2 million barrels per day this year—80,000 barrels fewer than their previous forecast. Even with this adjustment, OPEC might still be peering through those rose-coloured glasses, hoping the global economy fares better than it seems.

Let's face it—by all accounts, this should be a bearish setup for the dollar. Short-dated U.S. yields are already limping along, trading at a deep discount to the Fed Funds rate, and they're likely to slip further once the Fed's easing cycle kicks into gear—especially if incoming data serves up the confirmation of the market's worst growth nightmares. But here's where things take a turn: the Trump trade is rising like a phoenix from the ashes.

Economic stagnation in Europe and China could deepen significantly if the next U.S. administration doubles down on protectionism and isolationism, paradoxically fueling a dollar rally, with USDJPY being the odd man out.

With Trump already eyeing Japan for currency manipulation, we could be staring down the barrel of a trade war 2.0—a twist that might unexpectedly send the greenback soaring. The irony here? When we're all ready to write the dollar's obituary, global politics might step in and hand it a lifeline.

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