The U.S. dollar struggled to gain momentum against major currencies on Thursday as traders increasingly priced in a possible Federal Reserve rate cut next month, following comments from New York Fed President John Williams that such a move could happen.
The currency also faced headwinds from President Donald Trump’s escalated efforts to influence monetary policy, including his bid to remove Fed Governor Lisa Cook and replace her with a loyalist.
Even amid France’s prime minister calling a surprise confidence vote for next month—which is widely expected to topple his minority government—the dollar remained soft versus the euro.
The dollar index, which tracks the greenback against six major peers, was steady at 98.145 after two consecutive sessions of declines. The euro held near $1.1640, while sterling inched up to $1.3505.
The dollar fell 0.14% to 0.8015 Swiss franc and dropped 0.19% to 147.11 yen.
Japan’s chief trade negotiator, Ryosei Akazawa, canceled a last-minute visit to Washington on Thursday, postponing the announcement of details on Japan’s $550 billion U.S. investment pledge linked to the tariff agreement. A government spokesperson explained that the decision followed talks with U.S. officials, which revealed points that required further discussion “at the administrative level.”
Regarding monetary policy, Williams told CNBC Wednesday, “every meeting is, from my perspective, live.”
He added, “Risks are more in balance. We are going to just have to see how the data play out.”
Market participants are now focusing on key U.S. economic indicators ahead of the Fed’s September 16-17 meeting, including Friday’s PCE price index—the Fed’s preferred measure of inflation—and the monthly payroll report due a week later.
Traders are pricing roughly an 89% chance of a 25-basis-point rate cut in September and anticipate cumulative easing of 55 basis points by year-end, according to LSEG data. This helped push two-year Treasury yields—the most sensitive to policy expectations—to their lowest levels since May 1, adding pressure on the dollar.
Trump’s push to appoint dovish, hand-picked candidates to the Fed’s decision-making committee has also weighed on short-term yields. However, his move to oust Cook could trigger an extended legal battle after she sued to retain her position.
As DBS analysts highlighted, “The crux of the issue lies with whether Trump can remove Cook before March,” when the 12 reserve bank presidents must be reappointed by the board of governors.
They added, “In such a case, Trump could install his own, dovish picks, and as a result, ‘a more aggressive rate cut pace—one every meeting or even jumbo cuts—50 bps at a go—may be in the offing.’”
In offshore trading, the dollar dipped 0.03% to 7.1495 yuan. The Australian dollar held at $0.6507 after a 0.4% gain over the past two sessions, while Bitcoin rose 0.4% to around $112,913.
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