The U.S. dollar eased slightly on Thursday, trimming some of its previous gains as investors weighed the Federal Reserve’s latest policy decision and updates from U.S.-China trade discussions.
At 05:20 ET (09:20 GMT), the Dollar Index — which measures the greenback against a basket of six major currencies — slipped 0.1% to 98.950, having earlier touched a two-week high late Wednesday.
Fed’s Mixed Signals Keep Traders on Edge
The Federal Reserve cut interest rates by 25 basis points on Wednesday, lowering the target range to 3.75%–4.00%, in line with market expectations. Still, the outlook for additional easing this year remains uncertain amid a data vacuum caused by the federal government shutdown.
Speaking after the decision, Fed Chair Jerome Powell said another rate cut in December was “far from” a foregone conclusion — a comment that cooled expectations for further policy moves. Following his remarks, market pricing for another reduction fell to a 71% probability, down from 90% before the announcement.
“Last night’s Fed communication makes it harder to sell the dollar now,” analysts at ING wrote. “We will really need to see some soft U.S. jobs data to firm up views of another 75bp of easing from the central bank into next summer. Otherwise, 25bp could easily be priced out of that cycle.”
The dollar also found support from safe-haven flows as uncertainty lingered over trade talks between President Donald Trump and China’s Xi Jinping.
Trump described the first meeting between the two leaders in six years as “amazing,” adding that the U.S. would immediately lower tariffs on Chinese goods. In return, Trump said Beijing pledged to crack down on the chemicals used to produce fentanyl and to pause export controls on rare earth minerals.
Even so, Vital Knowledge analysts said “the deliverables don’t really alter the status quo” of U.S.-China trade ties “dramatically.”
Euro Edges Up After Robust French Growth Data
In Europe, the euro ticked higher, with EUR/USD up 0.2% to 1.1618, after data showed that France’s GDP grew 0.5% in the third quarter, beating expectations of a 0.2% increase. That followed 0.3% growth in the prior quarter.
Attention now turns to eurozone GDP figures, due later in the session, which are expected to show only 0.1% quarter-on-quarter growth and an annual pace of 1.2%.
“Remember that survey data has been encouraging, but the hard data has so far been poor this summer,” ING said. “But unless we get a big upside surprise to eurozone GDP – expected at 0.1% QoQ – it is hard to see EUR/USD getting much of a lift.”
The European Central Bank is also in focus, with policymakers widely expected to keep rates on hold at 2% later today.
“We doubt President Christine Lagarde will feel the need to rock the boat of market pricing, which very marginally favours another cut sometime over the next nine months,” ING added.
Meanwhile, the British pound was slightly firmer, with GBP/USD rising 0.1% to 1.3199, but remained near Wednesday’s 5½-month low.
Yen Weakens as Bank of Japan Holds Steady
In Asia, the Japanese yen came under pressure after the Bank of Japan left interest rates unchanged and maintained its cautious stance on the economy. The USD/JPY pair climbed 0.7% to 153.74.
The BOJ warned that Japan faces heightened near-term uncertainty, though accommodative monetary conditions would help cushion the impact. It also reiterated its commitment to raise rates if growth and inflation evolve as projected.
Elsewhere, the Chinese yuan retreated from a one-year high, with USD/CNY up 0.2% to 7.1089, following the conclusion of the Trump-Xi talks. Trump later told reporters that he expected a trade agreement with China “pretty soon,” adding that both sides had reached deals on rare earths and agricultural purchases.
The Australian dollar held steady, with AUD/USD unchanged at 0.6575.