U.S. equity futures wavered ahead of a pivotal week, with key inflation data and interest rate decisions looming. The S&P 500 futures showed little movement after a 1.2% rally on Monday. Investors are cautiously balancing U.S. recession concerns and hopes for a soft landing, while political risks rise ahead of the Trump-Harris debate. Hedge funds are preparing for potential volatility before the November election. Meanwhile, the European Central Bank is expected to cut rates again to combat economic weakness, with Morgan Stanley predicting the euro could drop to $1.02 by year-end.

The dollar edged down on Tuesday as markets awaited U.S. inflation data and the televised presidential debate, both of which could impact interest rate expectations. Uncertainty remains regarding whether the Federal Reserve will implement a 25 or 50 basis point rate cut at its upcoming meeting, with traders focused on Wednesday’s consumer price index report. Additionally, the debate could influence market positioning ahead of the November election, with a potential Trump victory expected to support the dollar.

The euro remained flat after a 0.5% drop on Monday, with investors watching for political developments in Europe, particularly in France and Germany. Fiscal issues and political uncertainty are seen as potential challenges for the euro in the second half of the year, with the European Central Bank expected to signal more rate cuts later this week. Meanwhile, the dollar gained slightly against the yen, recovering from last week’s losses. China’s yuan eased slightly despite better-than-expected export data.