US dollar and Treasury yields drop ahead of Fed decisionPresident Trump urges Powell to deliver bigger cutPound up after jobs data, yen gains on BoJ hike betsS&P 500, Nasdaq and gold hit new record highsTrump urges Powell to cut rates by moreThe US dollar dropped against all its major peers on Monday and extended its slide today as investors are convinced that the Federal Reserve will resume its rate-cut cycle on Wednesday after a prolonged pause.Treasury yields slipped as well, suggesting that the driver behind the dollar’s pullback may have been fresh calls by US President Trump for the Fed to lower interest rates more aggressively.That said, although Trump urged Powell to cut rates by more than he has in mind, Fed fund futures are pointing to a smaller probability of a 50bps cut at Wednesday’s gathering.Will the Fed satisfy dovish market expectations?There is only a mere 3% chance of a bold double cut, with the residual 97% pointing to a quarter-point reduction. The total number of basis points expected in reductions by the end of the year is 67, implying that investors still see a strong chance of three cuts by the end of the year, one at each of the remaining gatherings.What is also worth mentioning is that a federal appeals court yesterday denied Trump’s request to fire Lisa Cook before this week’s meeting, while the Senate voted in favor of Stephen Miran, the chair of Trump’s council of economic advisers, to enter the Board of Governors.This suggests that there may indeed be a dovish tilt on Wednesday, but whether policymakers’ new rate projections will agree with the market remains a big question. After all, although the June dot plot pointed to 50bps worth of additional rate cuts this year, there were seven members voting to keep borrowing costs untouched. So, matching investors’ expectations would mark a major shift.UK jobs data support patient BoE, BoJ hike seen before year-endThe pound took advantage of the dollar’s weakness and gained some extra ground today, perhaps as data today revealed that the UK labor market gained more jobs than expected, with the unemployment rate holding steady at 4.7%.This corroborates the view that the BoE is likely to stand pat on Thursday and perhaps stay sidelined for the remainder of the year. However, this doesn’t imply the decision will be a non-event. Investors may pay attention to the voting as even one or two members favoring a rate reduction could prompt them to bring forward their rate cut bets and thereby put the pound under pressure. Market participants are currently nearly fully pricing in a 25bps rate cut for March 2026.The yen is gaining the most today, perhaps due to the probability of another rate hike by the BoJ this year rebounding to around 60%. Although PM Ishiba’s resignation sparked concerns about his successor advocating for loser fiscal and monetary policy, a report hit the wires last week that the BoJ maintained the view that it may be possible to raise interest rates again this year despite the political turmoil. On top of that, a former top currency diplomat told Reuters that the BoJ should be mindful of the risks of inflation accelerating due to the yen’s prolonged weakness.Wall Street and gold explore uncharted territoriesOn Wall Street, all three indices traded in the green yesterday, with both the S&P 500 and the Nasdaq hitting fresh record highs. Expectations that the Fed may procced with looser policy moving forward allowed investors to cheer the prospect of lower borrowing costs. That said, if the Fed does not appear as dovish as the market expects on Wednesday, there is the risk of a decent pullback.Gold also matched a new all-time high as the drop in the dollar and Treasury yields decreased the opportunity risk for holding it.