Dollar falls as Fed rate cut hopes and political pressure intensify
On Wednesday, the dollar sank for a second straight day after a US inflation estimate raised chances of a Federal Reserve rate decrease next month and President Donald Trump resumed demands for lower rates. The dollar index sank 0.2% to 97.81, its lowest since July 28, extending Tuesday’s 0.5% decline.
On Tuesday, data indicated that US consumer prices rose little in July, as expected and as Trump’s broad tariffs have had little impact on goods pricing. LSEG data showed investors priced in a 98% possibility of a central bank rate cut next month. Treasury Secretary Scott Bessent called for a “series of rate cuts,” saying the Fed may start rate easing with a 50 basis point cut on Wednesday.
US President Donald Trump, who has regularly criticized Fed Chair Jerome Powell for not reducing rates sooner, increased pressure on the Fed the day before. White House spokeswoman Karoline Leavitt said the president was considering suing Powell for remodelling the central bank’s Washington offices. “I think there is quite significant pressure on the Fed from the political side of Washington to move on interest rates,” Scotiabank chief currency analyst Shaun Osborne said.
Michael Pfister, Commerzbank FX analyst, said these political moves resembled autocratic regimes, when statistics agency or central bank chiefs are replaced and crucial data series are abandoned or distorted. “This may not happen here. I’m not optimistic about the future of the US dollar after the last few days and weeks, “Pfister stated.
Trump also criticized Goldman Sachs CEO David Solomon for predicting US tariffs would damage the economy. Trump questioned Solomon’s Wall Street leadership. Dollar weakening boosted the euro and sterling. The single currency momentarily reached $1.1705, up 0.3% since July 28. The British pound climbed 0.5% to $1.3572, temporarily reaching its highest level since July 24.
Tuesday’s report showed Britain’s jobs market worsened again, but pay growth remained strong, highlighting the Bank of England’s caution in decreasing interest rates. The Australian dollar increased 0.3% to $0.6550 and the New Zealand dollar 0.5% to $0.5982. The Reserve Bank of Australia reduced interest rates as predicted on Tuesday and suggested future policy easing to meet inflation and employment goals as the economy slowed. Ether reached $4,734.47, a four-year high. “Ethereum’s quiet breakout is being fuelled by real-world adoption and capital confidence,” said OKX Singapore CEO Gracie Lin. “On our platform, ETH has now overtaken BTC as the most traded asset over the past month.”
