The US dollar fell to a two-week low on Wednesday after weak US inflation data boosted expectations that the Federal Reserve will cut interest rates next month, while attempts by President Donald Trump to expand his influence over US institutions added pressure on the currency.

The dollar index, which measures the performance of the US currency against a basket of rival currencies, dropped to 97.76, its lowest level since July 28, extending Tuesday’s 0.5% loss.

Data released on Tuesday showed that US consumer prices rose marginally in July, in line with expectations, while the impact of the broad tariffs imposed by Trump on goods prices has so far been limited.

Investors, anticipating an imminent rate cut, welcomed the data and priced in a 98% probability that the Fed will ease policy next month, according to LSEG data.

Francesco Pesole, a strategy analyst at ING, said: “The release of US CPI data was a negative event for the dollar.” He added: “A September rate cut remains strongly priced in.” He noted that while the acceleration in core inflation is not ideal, it is not concerning enough to outweigh the deterioration in the labor market.

Investor confidence in the dollar was further undermined by Trump’s recent attempts to influence the Fed’s independence, after White House spokesperson Karoline Leavitt said on Tuesday that the president is considering suing Federal Reserve Chair Jerome Powell over his handling of the central bank’s headquarters renovation in Washington.

Trump has long been at odds with Powell, repeatedly criticizing him for not cutting interest rates sooner. The US president also attacked Goldman Sachs CEO David Solomon, saying the bank was wrong in predicting that US tariffs would hurt the economy, and questioning whether Solomon is fit to lead the Wall Street institution.

In the currency markets, the dollar’s weakness helped lift both the euro and the British pound; the euro rose 0.3% to $1.1709, briefly hitting its highest level since July 28, while the pound climbed 0.4% to $1.3562, its highest level since July 24.

Data released on Tuesday showed the UK labor market weakened again, despite wage growth remaining strong, which explains the Bank of England’s caution in cutting interest rates.

The Australian dollar rose 0.35% to $0.6552, while the New Zealand dollar gained 0.5% to $0.5986. The Reserve Bank of Australia cut interest rates on Tuesday as expected and signaled that further easing may be needed to meet its inflation and employment goals amid a loss of economic momentum.

In cryptocurrency markets, Bitcoin stalled in its push toward a new record high, falling 0.34% to $119,809, while Ethereum climbed to its highest level in nearly four years at $4,679.

Gracy Lin, CEO of the Singapore branch of crypto exchange OKX, said: “Ethereum’s quiet breakout is driven by real-world adoption and capital confidence,” adding: “On our platform, Ethereum has overtaken Bitcoin to become the most traded asset over the past month.”

Gold prices rose in the European market on Wednesday, extending gains for the second consecutive day, supported by the broad decline of the US dollar against a basket of global currencies.

Moderate inflation data from the United States increased the likelihood of the Federal Reserve cutting interest rates in September, with markets awaiting further economic data on Thursday and Friday.

Price Overview

•Gold prices today: Gold rose by about 0.5% to $3,363.53, from the opening level of $3,348.26, after recording a low of $3,342.79.

•On Tuesday, gold settled with a gain of 0.2%, after earlier hitting a one-week low of $3,331.14 an ounce.

US Dollar

The US Dollar Index fell by 0.35% on Wednesday, deepening losses for the second session in a row, reaching a two-week low of 97.71 points, reflecting continued weakness in the US currency against a basket of global currencies.

As we know, the decline in the US currency makes dollar-priced bullion more attractive to buyers holding other currencies.

US Interest Rates

•Tuesday’s US data showed consumer prices rose moderately in July, with headline inflation unchanged against market expectations, while core inflation saw a slight increase.

•Karl Schamotta, chief market strategist at Corpay, said: Core inflation remains weak, giving policymakers room to maneuver in responding to signs of impending weakness in the labor market.

•Following the data, and according to the CME Group’s FedWatch Tool: the probability of a 25 basis-point rate cut in September rose from 88% to 94%, while the probability of rates staying unchanged fell from 12% to 6%.

•The probability of a 25 basis-point cut in October rose from 94% to 98%, while the probability of no change fell from 6% to 2%.

•To reprice these expectations, investors are awaiting important US data on Thursday and Friday, including producer prices, jobless claims, and monthly retail sales.

Gold Outlook

•Tim Waterer, chief market analyst at KCM Trade, said: The weaker US dollar has contributed to a moderate recovery in gold, with the precious metal fluctuating around $3,350 ahead of the Trump–Putin meeting on Friday.

•Waterer added: If the Alaska meeting produces no resolution and the war in Ukraine continues, gold could head back toward the $3,400 level.

SPDR Holdings

Gold holdings at SPDR Gold Trust, the largest global gold-backed ETF, remained unchanged on Tuesday, keeping the total at 964.22 metric tonnes — the highest level since September 12, 2022.

The euro rose in the European market on Wednesday against a basket of global currencies, maintaining gains for the second consecutive day against the US dollar, and is on the verge of recording its highest level in at least two weeks, as the US currency remains under negative pressure following the release of key US inflation data.

Expectations for a European interest rate cut in September have declined due to the currently entrenched inflationary pressures on European Central Bank policymakers. To reprice these expectations, investors are awaiting further economic data from the euro area.

Price Overview

•Today’s euro exchange rate: The euro rose against the US dollar by more than 0.1% to $1.1688, from today’s opening price of $1.1674, recording its lowest level at $1.1669.

•The euro ended Tuesday’s session up 0.5% against the dollar, its first gain in the last three days, supported by the rise in expectations of a US interest rate cut in September.

US Dollar

The US Dollar Index fell by about 0.1% on Wednesday, extending losses for the second consecutive session, and is about to surpass a two-week low of 97.90 points, reflecting continued weakness in the US currency against a basket of global currencies.

Data released Tuesday in the US showed a moderate rise in consumer prices in July, which led to an increase in expectations for the Federal Reserve to cut interest rates next month.

Karl Schamotta, chief market strategist at Corpay, said: “Core inflation remains subdued, allowing policymakers room to maneuver in response to signs of impending weakness in the labor market.”

Following this data and according to CME Group’s FedWatch tool: Market pricing for a 25 basis point US interest rate cut in the September meeting rose from 88% to 94%, while pricing for keeping rates unchanged fell from 12% to 6%.

To reprice these expectations, investors are awaiting key US data on Thursday and Friday, including producer prices, jobless claims, and monthly retail sales.

European Interest Rates

•Recent inflation data in the euro area showed that entrenched inflationary pressures persist for European Central Bank policymakers.

•According to some Reuters sources, a clear majority in the ECB’s latest meeting expressed a preference to keep interest rates unchanged in September, for the second consecutive meeting.

•Money market pricing for a 25 basis point ECB rate cut in September is currently steady below 30%.

•To reprice these expectations, investors in the coming period are awaiting numerous economic data releases in Europe, in addition to monitoring comments from ECB officials.

The Japanese yen declined in the Asian market on Wednesday against a basket of major and minor currencies, resuming losses that had temporarily paused yesterday against the US dollar, and is on the verge of touching its lowest level in two weeks, amid negative pressure, particularly from the currently weak prospects for the Bank of Japan to raise Japanese interest rates in September.

The US dollar rebounded as markets digested key US inflation data, awaiting further solid evidence regarding the likelihood of Federal Reserve rate cuts in September and October.

Price Overview

•Today’s yen exchange rate: The US dollar rose against the yen by 0.2% to ¥148.17, from today’s opening price of ¥147.84, recording its lowest level at ¥147.70.

•The yen ended yesterday’s session up 0.2% against the dollar, its first gain in the last three days, after earlier hitting a two-week low at ¥148.52.

•Aside from buying at lower levels, the yen rose after the release of US headline inflation data for July that came in below expectations.

Japanese Interest Rates

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

•Recently released inflation and wage data showed declining inflationary pressures on Japanese central bank policymakers.

•Market pricing for a quarter-point interest rate hike at the September meeting remains below 40%.

•To reprice these expectations, investors are awaiting further data on inflation, unemployment, and wages in Japan.

US Dollar

The US Dollar Index rose by about 0.1% on Wednesday, in an attempt to recover from a two-week low of 97.90 points, reflecting a rebound in the greenback against a basket of global currencies.

Aside from buying at lower levels, the dollar’s rebound came as trade tension concerns between the US and China eased, in addition to digesting Tuesday’s US inflation data.

Carol Kong, currency strategist at Commonwealth Bank of Australia, said: “The July CPI report showed less evidence of tariffs impacting prices… (but) I think a rate cut in September is not entirely certain, and perhaps not as certain as current market pricing suggests.”

According to CME Group’s FedWatch tool: Market pricing for a 25 basis point rate cut at the September meeting is currently steady at 94%, with a 6% probability of no change in rates.

To reprice these expectations, investors are awaiting key US data on Thursday and Friday, including producer prices, jobless claims, and monthly retail sales.