The U.S. dollar traded within a narrow band early Wednesday, as attention centered on President Donald Trump’s upcoming decision on who will fill a key vacancy on the Federal Reserve’s Board of Governors.
At 03:50 ET (07:50 GMT), the U.S. Dollar Index slipped 0.1% to 98.527, as the currency held steady following its biggest daily loss in nearly four months on Friday, triggered by weaker-than-expected jobs data.
Fed Vacancy Draws Focus
The dollar’s recovery has been sluggish in the wake of last week’s labor market report. Additional pressure came from Tuesday’s data, which showed U.S. services activity stagnating in July despite a sharp uptick in input costs — the fastest increase in nearly three years — suggesting continued economic strain from tariffs.
Markets remain convinced of an imminent rate cut, pricing in a 90% probability of easing by September, and forecasting around 56 basis points of cuts by the end of 2025.
With a light economic calendar on Wednesday, investor focus has shifted to Trump’s forthcoming nomination to replace Adriana Kugler, who is stepping down from the Fed board. The president indicated on Tuesday that he will announce his pick before the end of the week.
“Trump’s open attacks on the Bureau of Labor Statistics over payroll revisions have not had much market impact, but it will be interesting to see whether the selected Fed chair candidate echoes that narrative,” said analysts at ING in a research note.
“If so, it could ignite fears of a disconnect between Fed policy and official data – a scenario we see as decidedly dollar-negative.”
Euro Slightly Up; Sterling Traders Watch BoE
The euro edged higher despite underwhelming data from Germany. EUR/USD was last seen at 1.1576, after German industrial orders posted a 1% drop in June, extending the decline into a second straight month. Analysts had expected a 1.0% increase.
Later in the day, Eurozone retail sales figures will be released, with a 0.4% monthly rise forecast following May’s 0.7% fall.
“EUR/USD remains almost entirely driven by the dollar leg, and we continue to see decent upside potential mostly on the back of the Fed’s dovish repricing rather than any supportive eurozone story,” noted ING.
Meanwhile, GBP/USD slipped to 1.3295, as investors remained cautious ahead of Thursday’s Bank of England policy meeting. The BoE is anticipated to cut its benchmark rate from 4.25% to 4%, with a second rate reduction expected before the end of the year. This comes despite June inflation nearing double the central bank’s 2% target.
Indian Rupee Stabilizes After RBI Hold
In Asia, USD/JPY inched up to 147.66, following weaker Japanese wage data that suggested limited inflation pressure ahead.
The Australian dollar bounced back, with AUD/USD rising 0.4% to 0.6489, while USD/CNY increased 0.1% to 7.1891, amid ongoing tension over U.S. tariff threats related to China’s continued purchases of Russian oil.
The Indian rupee recovered slightly, with USD/INR dipping 0.1% to 87.697, after spiking above 88 earlier in the week. Support came after the Reserve Bank of India (RBI) kept its policy rate unchanged at 5.50%, going against some expectations for a cut.
Concerns over higher U.S. tariffs and broader global headwinds had led some investors to price in more easing. So far in 2025, the RBI has lowered interest rates by a full percentage point.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.