The US dollar held steady on Thursday as investors awaited US consumer inflation data for clearer signals on the Federal Reserve’s rate-cut path, while the euro remained unchanged ahead of the European Central Bank meeting.

Michalis Rousakis, G10 FX strategist at Bank of America, said: “The main event is the US CPI data… the market is looking for justification to reprice Fed expectations toward a larger cut, which could push the dollar lower.”

He added that the question is whether the Fed can be repriced for more easing, “given that markets are already pricing in a cut in September, and nearly three cuts by year-end.” He explained that Bank of America’s baseline expectation is for two additional cuts this year.

The dollar index rose 0.1% to 97.91, with the US currency largely stable against major counterparts.

This came after data on Wednesday showed an unexpected decline in US producer prices, strengthening expectations of a Fed rate cut next week. It followed Tuesday’s revision to payroll figures, which revealed the US created 911,000 fewer jobs in the 12 months through March than previously estimated.

In Europe, the ECB is expected to keep rates unchanged at its meeting later today. The euro was steady at $1.169225 before the decision. Analysts said policymakers may adopt a more dovish tone to address trade and political uncertainty across the continent.

The single currency stabilized after two days of losses, while geopolitical tensions on the EU’s eastern flank continued. Poland said Wednesday it shot down suspected Russian drones in its airspace with NATO support — the first known instance of a NATO member using direct military force since the Russia-Ukraine war began.

In a note, Commerzbank analysts said hopes that the ECB meeting might spark a bigger EUR/USD move could be disappointed, given the lack of expected new information. They added: “If there are any hopes, they may rest with ECB President Christine Lagarde, who appeared surprisingly hawkish in her last two press conferences.”

But they emphasized that with no rate cut expected until June next year, Lagarde is unlikely to reveal her stance at this early stage.

Focus on the Fed

Market attention remains centered on the Fed’s easing path. Investors view rate cuts as a given, but the question remains: how large?

According to the CME FedWatch tool, traders price an 8.9% chance of a larger 50-basis-point cut at the September 16–17 meeting, while a 25-basis-point cut is fully guaranteed.

At the same time, the Fed’s policymaking committee has remained in focus, after the Trump administration on Wednesday moved to appeal a court ruling that temporarily blocked his unprecedented attempt to dismiss Fed Governor Lisa Cook. The White House seeks to remove her ahead of next week’s meeting.

Meanwhile, Stephen Miran moved a step closer to joining the Fed Board of Governors, part of Trump’s efforts to expand his direct influence over monetary policy. The Senate Banking Committee voted to advance his nomination, although lawmakers noted it remains uncertain whether the process will be completed in time for him to participate in the upcoming meeting.

Other Currencies

The dollar rose 0.2% to ¥147.80 after data showed Japan’s wholesale prices increased 2.7% year-on-year in August, accelerating from the previous month and reflecting continued inflationary pressures in the world’s fourth-largest economy.

The Australian dollar fell 0.1% to $0.66095, retreating after hitting its highest since November on Wednesday as commodity prices, including oil and gold, weakened.

The offshore yuan traded at 7.1216 per dollar, up 0.04%. The New Zealand dollar dropped 0.2% to $0.59290, while sterling slipped 0.1% to $1.35195.

Gold prices fell in the European market on Thursday, moving away from all-time highs, as correction and profit-taking activity intensified, in addition to pressure from the stronger US dollar in the foreign exchange market.

Weak US producer price data boosted expectations of a Federal Reserve rate cut next week. For further clarity, investors are awaiting consumer price data later today, considered the main gauge of US inflation.

Price Overview

• Gold prices today: Gold fell by 0.5% to ($3,621.62), from the opening level at ($3,640.59), recording the highest at ($3,649.21).

• At Wednesday’s settlement, gold prices rose by 0.4%, resuming gains that had paused the day before amid correction and profit-taking from the all-time high of $3,674.80 per ounce.

US Dollar

The dollar index rose by about 0.2% on Thursday, extending gains for the third consecutive session, reflecting the continued advance of the US currency against a basket of major and minor counterparts.

As we know, the stronger US dollar makes dollar-priced bullion less attractive to buyers holding other currencies.

US Interest Rates

• US producer price data for August came in weaker than market forecasts on an annual basis and unexpectedly contracted on a monthly basis, signaling a potential slowdown in consumer prices during September.

• According to the CME FedWatch tool: the probability of a 25-basis-point rate cut in September is currently priced at 100%, with an 8% chance of a 50-basis-point cut.

• The probability of a 25-basis-point cut in October is also fully priced at 100%, with a 6% chance of a 50-basis-point cut.

US Inflation Data

To reaffirm these odds, traders are awaiting key US inflation data for August later today, which are expected to heavily influence the Fed’s policy path.

At 12:30 GMT, the headline consumer price index (CPI) will be released, expected to rise by 2.9% year-on-year in August from 2.7% in July. Core CPI is expected to increase by 3.1% year-on-year, unchanged from the previous reading.

Gold Outlook

• Ilya Spivak, financial markets strategist, said: “Gold appears to be holding on to recent gains as markets await the US CPI report and its impact on Fed rate cut expectations.”

• Spivak added: “The current trend for gold prices points upward, but a strong CPI report could strengthen the dollar and hurt gold in the short term, pushing it lower.”

• He explained: “Losses may be limited, as markets are unlikely to abandon their rate-cut bets even if easing is delayed somewhat.”

SPDR Fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by about 0.28 metric tons yesterday, bringing the total to 979.96 metric tons, rebounding from 979.68 metric tons, the lowest since August 29.

The euro rose at the opening of the European market on Thursday against a basket of global currencies, resuming gains after two days of losses against the US dollar, moving toward a seven-week high. However, the rise remains limited amid ongoing geopolitical tensions in Eastern Europe.

Ahead of the European Central Bank’s monetary policy decisions later today, interest rates are widely expected to remain unchanged for the second consecutive meeting.

Global financial markets are awaiting signals from the ECB on the possibility of resuming the monetary easing cycle during the remainder of this year.

Price Overview

• Exchange rate of the euro today: The euro rose against the US dollar by 0.1% to ($1.1707), from today’s opening price at ($1.1695), recording the lowest at ($1.1693).

• The euro ended Wednesday’s trading down by 0.1% against the US dollar, marking a second consecutive daily loss, as correction and profit-taking continued from the seven-week high of $1.1780.

Geopolitical Tensions

As geopolitical tensions escalated on Europe’s eastern front, Poland announced on Wednesday that it intercepted and shot down Russian drones suspected of violating its airspace, with support from NATO aircraft.

This incident marks a significant precedent, as it is the first time a NATO member state has announced the direct use of military force since the outbreak of the Russia-Ukraine war, highlighting the seriousness of the situation and the risk of conflict expansion.

European Central Bank

The European Central Bank concludes later today its sixth monetary policy meeting of 2025, with expectations of maintaining a pause in rate cuts. The awaited statement is expected to provide further signals and clarifications about the future path of interest rates for the remainder of this year.

Expectations are currently stable for the ECB to keep interest rates unchanged at the 2.15% range, the lowest level since October 2022, for the second consecutive meeting.

The ECB interest rate decision and policy statement are due at 12:15 GMT, followed by a press conference with ECB President Christine Lagarde at 12:45 GMT.

Euro Outlook

At Economies.com, we expect: If the ECB’s comments turn out more hawkish than markets anticipate, the odds of an interest rate cut before year-end will decline, leading to further gains in the euro against a basket of global currencies.

The Australian dollar rose in the Asian market on Thursday against a basket of global currencies, maintaining gains for the second consecutive day against its US counterpart, trading near the ten-month high recorded in earlier dealings yesterday. This rise came on the back of higher commodity and base metal prices in global markets.

The Australian dollar’s gains were also supported by renewed inflationary pressures on policymakers at the Reserve Bank of Australia, which led to a decline in the odds of an interest rate cut in September.

Price Overview

• Exchange rate of the Australian dollar today: The Australian dollar rose against the US dollar by about 0.15% to (0.6621), from today’s opening price at (0.6613), recording the lowest level at (0.6608).

• On Wednesday, the Australian dollar gained 0.45% against the US dollar, its third gain in the last four days, recording a ten-month high at 66.36 cents, amid strong buying of the Australian currency.

Global Commodity Prices

Global commodity and metals prices have recently witnessed a strong wave of gains, driven by rising demand from major economies, particularly China and the United States, in addition to geopolitical tensions that have reinforced investors’ shift toward basic commodities as a safe haven.

This rise reflects positively on the Australian economy, which is one of the world’s largest exporters of iron ore, coal, and gold. It contributes to strengthening the trade surplus and boosting revenues for companies operating in the mining sector.

It also provides strong support for the government’s budget through higher tariff and tax revenues, giving the Australian economy greater flexibility to withstand global inflationary pressures and maintain stable growth rates.

Australian Interest Rates

• Recent data from Sydney showed inflation in the country rising to its highest level in a year, renewing inflationary pressures on policymakers at the Reserve Bank of Australia.

• Following the above inflation data, market pricing of a 25-basis-point interest rate cut by the Reserve Bank of Australia in September fell from 30% to 22%.

• To reprice those odds, investors are awaiting further data on inflation, unemployment, and wages in Australia ahead of the upcoming September 30 meeting.