The US Dollar lost momentum against major currencies on Thursday as traders increased wagers on a Federal Reserve rate cut next month, following comments from New York Fed President John Williams suggesting a reduction was possible.
Adding to the pressure, President Donald Trump has intensified efforts to influence monetary policy, seeking to remove Fed Governor Lisa Cook and replace her with an ally.
The Dollar weakened against the Euro despite France’s prime minister unexpectedly calling a confidence vote for next month, which could topple his minority government, Reuters reports.
The Dollar index, measuring the greenback against six major peers, held steady at 98.145 after two consecutive days of declines.
The Euro was largely unchanged at $1.1640, while the British Pound inched up to $1.3505.
The Dollar fell 0.14% to 0.8015 Swiss Franc and declined 0.19% to 147.11 Yen, Reuters reports.
Furthermore, Japan’s chief trade negotiator, Ryosei Akazawa, unexpectedly cancelled a trip to Washington on Thursday, postponing the announcement of Japan’s $550 billion investment plan in the US under a tariff agreement.
A government spokesperson explained that the decision followed discussions with US officials that identified several points requiring further administrative-level review.
Looking ahead to the Federal Reserve’s 16th-17th September policy meeting, key data releases include Friday’s PCE price index, the Fed’s preferred measure of inflation, followed by the monthly payroll report a week later.
Traders are currently assigning roughly an 89% probability to a 25-basis-point rate cut next month and have priced in a total of 55 basis points of easing by the end of the year, according to LSEG data.
This pushed two-year Treasury yields, which are highly sensitive to Fed policy expectations, down to their lowest level since 1st May overnight, increasing downward pressure on the Dollar.
President Trump’s efforts to install dovish-leaning, hand-picked candidates on the Federal Reserve’s decision-making committee also pushed short-term yields lower, despite the potential for a lengthy legal battle after Governor Cook sued to retain her position.
Elsewhere, the Dollar dipped 0.03% to 7.1495 Yuan in offshore trading, meanwhile the Australian Dollar held steady at $0.6507, after gaining 0.4% over the past two sessions.