The US dollar continued its decline against major currencies on Thursday, as growing expectations of interest rate cuts by the Federal Reserve combined with rising concerns over partisan divisions creeping into key American institutions.

Initial jobless claims in the US are under scrutiny after last week’s disappointing employment data, which contributed to the dollar’s weakness. In contrast, the euro found support ahead of expected peace talks next week to end the war between Russia and Ukraine.

Last week, President Donald Trump dismissed the official responsible for labor market data he found unsatisfactory. Market attention is now focused on his nominee to fill an upcoming vacancy on the Fed’s Board of Governors, as well as the list of potential candidates to succeed the current Fed chair.

Tony Sycamore, market analyst at IG, commented: “All of this points to mounting political risk surrounding the US dollar, in addition to the recent string of weak economic indicators.”

He added: “Any breakthrough in ending the war in Ukraine would be a positive catalyst for the euro.”

The dollar index — which measures the greenback’s performance against a basket of major currencies — rose 0.1% to 98.259 in early Asian trading, after falling 0.6% in the previous session.

The dollar held steady at 147.36 yen, while the euro traded at $1.1654, down about 0.1% after gaining 0.7% in the prior session.

US Labor Department data is expected to show initial jobless claims rising by 3,000 to reach 221,000 for the week ending August 2. Continuing claims for the week ending July 26 are also projected to see a slight increase.

Last Friday’s report revealed weaker-than-expected US job growth in July, alongside significant downward revisions to May and June figures, indicating a sharp deterioration in labor market conditions.

Traders in interest rate futures are now pricing in a 94% chance of a 25-basis-point cut at the Fed’s September meeting, up from 48% a week ago, according to CME Group’s FedWatch tool. Overall, markets are expecting around 60.5 basis points in rate cuts for the year.

A White House official said Wednesday that Trump could meet with Russian President Vladimir Putin as early as next week, as Washington continues to pressure Moscow to end the war in Ukraine.

Trump also stated Tuesday that he would announce his pick to replace outgoing Fed board member Adriana Kugler by the end of the week. He has also narrowed the list of candidates to succeed Jerome Powell as Fed Chair to four names.

The British pound held steady at $1.33505, while the Australian dollar was little changed at $0.65.

Gold prices jumped in European trading on Thursday, hitting a two-week high and resuming gains that had temporarily paused yesterday. The metal is now approaching the critical $3,400 per ounce mark, supported by a weakening US dollar in the foreign exchange market.

Less aggressive remarks from some Federal Reserve officials have bolstered expectations of a US interest rate cut in September, with markets awaiting further signals about the Fed’s policy trajectory for the remainder of the year.

Price Overview

• Gold prices today: Gold rose by 0.85% to $3,397.57 per ounce — the highest level since July 23 — from an opening of $3,369.26. The session low was recorded at $3,365.44.

• On Wednesday, gold settled down 0.35%, marking its first loss in five sessions due to profit-taking and corrective moves.

US Dollar

The dollar index fell 0.25% on Thursday, deepening its losses for a second consecutive session and recording a two-week low at 97.95 points, reflecting continued weakness in the US currency against a basket of major peers.

This decline comes amid growing concerns over leadership stability at the Federal Reserve, as preparations are underway to fill a vacant seat on the Board of Governors and announce candidates for the Fed chairmanship.

On Wednesday, President Trump imposed an additional 25% tariff on Indian imports, citing New Delhi’s continued purchases of Russian oil. The move escalated the trade rift between the two countries, with negotiations now at a standstill.

US Interest Rates

• Minneapolis Fed President Neel Kashkari said Wednesday that the Fed may need to cut interest rates soon in response to slowing US economic growth.

• San Francisco Fed President Mary Daly stated Monday that, with mounting evidence of labor market weakness and no signs of persistent inflation from tariffs, "the time has come" to cut interest rates.

• Following these remarks, CME Group’s FedWatch Tool showed the probability of a 25-basis-point rate cut in the September meeting rising from 88% to 94%, while expectations for no change fell from 12% to 6%.

• For the October meeting, the probability of a 25-basis-point cut rose from 95% to 98%, and the odds of maintaining rates dropped from 5% to 2%.

• Investors are watching closely for additional Fed commentary today, as well as weekly US jobless claims data, to reassess rate expectations.

Gold Outlook

• Tim Waterer, Chief Market Analyst at KCM Trade, said: “Trump is issuing fresh tariff threats, keeping gold in the spotlight as a safe haven for investors.”

• He added: “Gold is approaching the psychological $3,400 mark, with risk assets remaining somewhat unsteady due to President Trump’s ongoing tariff rhetoric.”

SPDR Fund

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell by approximately 3.15 metric tons on Wednesday to 952.79 metric tons — the lowest level since July 21.

The British pound rose in European trading on Thursday against a basket of global currencies, extending gains for the fifth consecutive day against the US dollar and reaching its highest level in a week, supported by weakness in the US currency in the forex market.

This rise comes ahead of the Bank of England’s monetary policy decision at the conclusion of its fifth regular meeting of 2025, where the bank is widely expected to cut UK interest rates by 25 basis points to a range of 4.00% — the lowest level since February 2023.

Price Overview

• The pound rose against the dollar by 0.15% to $1.3371 — the highest in a week — from today’s opening price of $1.3351, after recording a low of $1.3346.

• On Wednesday, the pound rose by 0.45% against the dollar, marking a fourth straight daily gain amid broad weakness in the US dollar against major and minor currencies.

US Dollar

The US dollar index fell on Thursday by 0.1%, deepening losses for a second session in a row and hitting a two-week low of 98.11 points, reflecting continued decline in the greenback against a basket of global currencies.

Minneapolis Fed President Neel Kashkari said Wednesday that the Federal Reserve may need to cut interest rates in the near term in response to slowing economic growth in the US.

Following his remarks, the probability of a Fed rate cut in September rose from 90% to 94%.

Markets are also focused on President Donald Trump’s nominations to the Federal Reserve Board following the resignation of Fed Governor Adriana Kugler last Friday, as well as his choice for the next Commissioner of the Bureau of Labor Statistics.

Trump stated on Tuesday that he would soon announce decisions regarding Kugler’s replacement in the short term, including his pick for the next Fed Chair. Treasury Secretary Scott Bessent was ruled out as a candidate to succeed current Fed Chair Jerome Powell, whose term ends in May 2026.

Trump said Bessent "does not want" to be Fed Chair, but four other candidates remain in the running.

Bank of England

Global markets broadly expect the Bank of England to announce a 25-basis-point interest rate cut on Thursday, lowering rates to a range of 4.00% — the lowest since February 2023 — marking the third rate cut this year.

At 12:00 GMT, the BOE is set to release its interest rate decision, monetary policy statement, and voting breakdown.

BOE Governor Andrew Bailey will speak at a press conference at 12:30 GMT to comment on the policy meeting outcome, inflation developments, and the future path of interest rates.

Pound Outlook

At Economies.com, we expect that if the Bank of England and Governor Andrew Bailey deliver more hawkish-than-expected remarks, market expectations of a September rate cut could decline, paving the way for further gains in sterling levels.

The Japanese yen declined in Asian markets on Thursday against a basket of major and minor currencies, retreating from its two-week high against the US dollar amid active profit-taking and corrective movements. The drop followed less hawkish comments from Japanese political leaders, which reduced expectations of a rate hike by the Bank of Japan in September.

Meanwhile, the yield on 10-year US Treasury bonds continues to recover from its lowest level in three months, ahead of President Donald Trump’s upcoming decision on Federal Reserve appointments.

Price Overview

• USD/JPY rose by 0.25% to ¥147.71, up from the opening level of ¥147.34, after hitting a low of ¥147.15.

• The yen gained 0.2% against the dollar at Wednesday’s settlement, resuming its upward momentum after a pause the previous day, during a correction from the two-week high of ¥146.62.

Japanese Commentary

Ken Saito, a senior official in Japan’s ruling party, told Reuters that the Bank of Japan should be cautious about raising interest rates due to the anticipated impact of US tariffs on the fragile economy.

Japanese Interest Rates

• Following these comments, market pricing for a 25-basis-point rate hike by the Bank of Japan in September dropped from 55% to 49%.

• Minutes from the Bank of Japan’s June policy meeting showed that some board members stated the central bank would consider resuming rate hikes if trade tensions eased.

• Investors now await further data on inflation, unemployment, and wage growth in Japan to reprice rate hike expectations.

US Bond Yields

The yield on 10-year US Treasury bonds rose by 0.4% on Thursday, marking a third consecutive session of recovery from the three-month low of 4.186%, lending support to the US dollar’s strength.

This development in the US bond market comes as President Donald Trump prepares to fill the vacant seat on the Federal Reserve Board of Governors and select candidates for the next Fed Chair.

Trump stated on Tuesday that he would make a decision by the end of the week on who will replace outgoing Fed Governor Adriana Kugler. He also narrowed his list of potential replacements for Jerome Powell to four candidates.