Second day of losses for the US currency
The US dollar fell for a second consecutive session on Wednesday, following an inflation report that strengthened market expectations for a Federal Reserve rate cut next month. Renewed calls from President Donald Trump for lower rates added to the downward pressure. The dollar index dropped 0.2% to 97.81, its lowest since July 28, extending Tuesday’s 0.5% decline.
US consumer prices rose only slightly in July, in line with forecasts. The limited inflation impact from Trump’s tariffs on imported goods supported the view that the Fed has room to ease monetary policy. LSEG data showed investors now see a 98% probability of a rate cut in September.
Political pressure on the Federal Reserve
Treasury Secretary Scott Bessent urged the Fed to implement “a series of rate cuts,” suggesting an initial 50 basis point reduction. A day earlier, President Trump criticized Fed Chair Jerome Powell for not cutting rates sooner, and the White House said Trump was considering legal action against Powell over renovations at the Fed’s Washington headquarters.
Shaun Osborne, chief currency strategist at Scotiabank, noted “significant political pressure” on the Fed. Michael Pfister, FX analyst at Commerzbank, warned that such developments resemble practices in authoritarian countries where central bank independence is undermined.
Global currency moves
The dollar’s weakness boosted other major currencies. The euro rose 0.3% to $1.1705, its highest since July 28, while the British pound climbed 0.5% to $1.3572, its strongest since July 24. UK labour market data showed further job market softening, though wage growth remained solid, influencing the Bank of England’s cautious stance on rate cuts.
The Australian dollar gained 0.3% to $0.6550, and the New Zealand dollar rose 0.5% to $0.5982. The Reserve Bank of Australia had cut interest rates a day earlier, signalling that further easing may be needed to support inflation and employment as economic momentum slows.
