US dollar steadies as traders assess trade developments, interest rate forecasts

The US dollar held broadly steady against most major currencies on Tuesday, supported by expectations of interest rate cuts and ongoing monitoring of key trade policy developments.

In a statement to CNBC today, the US president said that planned tariffs on imported pharmaceuticals could eventually reach as high as 250%.

Data released Tuesday by the Institute for Supply Management (ISM) showed that the US services PMI fell to 50.1 points, down from 50.8 in June.

Goldman Sachs expects the Federal Reserve to implement three consecutive interest rate cuts of 25 basis points starting in September, with the possibility of a 50-basis-point cut if the next jobs report shows a further rise in unemployment.

The firm also believes that the European Central Bank (ECB) has already concluded its monetary easing cycle.

Meanwhile, economists have raised their growth forecasts for the Eurozone and Japan following what were described as moderate trade agreements, while noting that Friday’s US jobs report indicated the US economy is nearing a recession.

Elsewhere, analysts said that the dismissal of the Bureau of Labor Statistics (BLS) director on Friday, along with the resignation of Federal Reserve Governor Adriana Kugler, could prompt the Federal Open Market Committee (FOMC) to adopt a firmer stance to protect its independence. They noted that Kugler’s replacement would hold only a single vote on the committee.

Interest rate cuts

Financial markets currently reflect a 92% probability that the Federal Reserve will cut interest rates at its upcoming September meeting, up from 63% a week ago. Markets are also pricing in a total of 130 basis points in rate cuts by October 2026 — 30 basis points more than the forecast prior to Friday’s US jobs data.

The Japanese yen declined by 0.14% to ¥147.3 per dollar, after minutes from the Bank of Japan’s June meeting showed that some board members said the central bank may reconsider interest rate hikes if trade tensions ease.

Attention remains focused on the uncertainty surrounding new tariffs, after President Trump last week imposed additional duties on imports from dozens of countries — a move that sparked concerns about global economic health.

As of 20:31 GMT, the US Dollar Index was steady at 98.8 points, having recorded a high of 99.07 and a low of 98.5.

Australian dollar

The Australian dollar held steady against its US counterpart at 0.647 as of 20:46 GMT.

Canadian dollar

The Canadian dollar also held steady against the US dollar at 0.7255 as of 20:46 GMT.