The U.S. dollar fell on Tuesday to its lowest level in more than two months against the British pound and the euro, and to a ten-month low against the Australian dollar, as investors increased bets on an expected Federal Reserve rate cut this week.

The dollar index – which measures the performance of the greenback against a basket of six major currencies – dropped to 97.121 after touching its weakest level since July 7, coinciding with renewed calls from U.S. President Donald Trump for bolder monetary easing.

Markets expect the Fed to cut rates by 25 basis points on Wednesday, after a run of weak U.S. labor market data in recent weeks strengthened bets on further easing.

In a social media post on Monday, Trump urged Fed Chair Jerome Powell to implement a “larger” cut, citing conditions in the housing market.

Mohit Kumar, strategist at Jefferies, said: “The focus is on Wednesday’s Fed meeting… the key will be Powell’s tone.” He added: “If Powell emphasizes inflation risks or uncertainty around growth and inflation expectations, we may see markets trim some of their rate-cut expectations.”

In currency markets, sterling rose 0.2% to $1.3627, its highest level since July 8, after data showed the UK labor market losing some momentum, which could ease the Bank of England’s concerns over persistent inflation pressures.

Data from the Office for National Statistics showed the number of employees on company payrolls fell for a seventh consecutive month, while private-sector wage growth – closely watched by the BoE – slowed to 4.7% between May and July, compared with 4.8% in the three months to June. The BoE is expected to leave rates unchanged this week after cutting them in August.

Laith Al-Khunor, global markets analyst at eToro, said: “Until inflation convincingly declines, the Bank of England will remain stuck at elevated interest-rate levels, which keeps pressure on growth.”

The euro gained as much as 0.3% against the dollar to reach $1.1797, its highest level since July 3. Investors are awaiting German ZEW survey data, eurozone wage figures, and industrial production numbers later in the day.

The Australian dollar edged slightly lower by 0.06% to $0.6666, after rising earlier to $0.6677, its strongest level since November 8.

Meanwhile, the dollar weakened 0.3% against the Japanese yen to 146.920 ahead of Friday’s Bank of Japan meeting, where markets widely expect rates to be kept unchanged at 0.5%.

On the political front, Japan’s agriculture minister and the government’s chief spokesperson announced their bids to lead the ruling party, succeeding outgoing Prime Minister Shingoro Ishiba, who stepped down last month.

Gold prices rose in the European market on Tuesday, extending gains for the third consecutive session and setting a fresh all-time high, on the verge of surpassing the $3,700 per ounce barrier for the first time in history, supported by the continued decline of the U.S. dollar in the foreign exchange market.

Later today, the Federal Reserve’s highly anticipated monetary policy meeting will commence, with decisions due on Wednesday. Market expectations currently remain anchored on a 25 basis-point interest rate cut.

Price Overview

Gold prices today: The price of the precious metal rose by 0.5% to a new all-time high of $3,697.26, from the opening level of $3,679.21, after recording a session low of $3,674.82.

At Monday’s settlement, gold gained 1.0%, its second consecutive daily rise, also hitting a new record high.

U.S. Dollar

The dollar index fell 0.3% on Tuesday, deepening losses for the second straight session and hitting a 10-week low of 97.04, reflecting continued weakness in the U.S. currency against a basket of major peers.

This decline is attributed to active selling ahead of the Fed’s expected decision on Wednesday to cut interest rates by 25 basis points.

At the same time, U.S. President Donald Trump has been increasing pressure on Fed policymakers to implement deeper rate cuts. In a social media post on Monday, Trump called on Fed Chair Jerome Powell to deliver a “larger” rate cut, citing risks facing the U.S. housing market.

Federal Reserve

Later today, the Federal Reserve begins its key monetary policy meeting, with decisions due on Wednesday. Expectations indicate a 25 basis-point rate cut.

Monetary policy data, updated economic projections, and remarks from Fed Chair Jerome Powell are expected to provide strong clues on whether additional cuts will follow later this year.

U.S. Interest Rates

According to CME FedWatch: The probability of a 25 basis-point cut at this week’s meeting is currently priced at 100%, while the chance of a larger 50 basis-point cut stands at 4%.

For the October meeting, markets are also pricing a 100% chance of a 25 basis-point cut, and a 3% chance of a 50 basis-point cut.

Gold Outlook

UBS analyst Giovanni Staunovo said: “Dollar weakness is playing a major role in driving gold higher, but it all comes down to expectations for the Fed’s rate cut this week.”

Staunovo added: “With the Fed’s statement imminent, we expect higher volatility, especially if markets perceive the cut to come with a hawkish tone.”

He further noted: “But with Trump pushing for a larger cut, I believe gold is likely to trend higher in the coming months.”

Traders and industry experts at the India Gold Conference in New Delhi commented that gold’s stunning surge to successive record highs shows every sign of continuing through the end of 2025, though a strong technical correction is expected before it breaks above $4,000 per ounce in 2026.

SPDR Fund

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by 2.01 metric tons on Monday, lifting the total to 976.81 metric tons, rebounding from 974.80 metric tons, the lowest since August 28.

The British pound rose in European trading on Tuesday against a basket of global currencies, extending gains for the second consecutive session versus the U.S. dollar and hitting its highest level in ten weeks. The move was supported by ongoing selling of the U.S. currency in the foreign exchange market.

The Bank of England meets on Thursday to discuss appropriate monetary policy tools for the U.K. economy, with markets fully expecting rates to remain unchanged.

To reassess expectations for rate cuts later this year, investors are awaiting key U.K. labor market data due later today.

Price Overview

The pound rose 0.2% against the dollar to $1.3625, its highest since July 8, from an opening level of $1.3598, after touching a session low of $1.3597.

On Monday, the pound gained 0.3% versus the dollar, its third advance in four sessions, supported by weakness in the greenback and U.S. Treasury yields.

U.S. Dollar

The dollar index fell 0.2% on Tuesday, extending its decline for a second straight session to hit a two-month low at 97.16, reflecting continued weakness in the U.S. currency against a basket of global peers.

This decline is driven by active selling ahead of an expected Federal Reserve decision on Wednesday to cut interest rates by 25 basis points.

At the same time, U.S. President Donald Trump has been ramping up pressure on Fed policymakers to deliver deeper cuts. In a Monday social media post, he urged Fed Chair Jerome Powell to implement a “larger” reduction in the benchmark rate, citing risks facing the U.S. housing market.

U.K. Interest Rates

The August vote on cutting rates revealed a clear split among Bank of England members over the future path of policy easing.

The Bank meets this week to address recent economic developments, particularly growing concerns over financial stability.

Current market pricing suggests less than a 20% probability of a 25-basis-point rate cut at Thursday’s meeting.

U.K. Labor Market

To reassess prospects for policy easing this year, investors are watching key labor data due later today, including August jobless claims, the unemployment rate, and July average earnings.

Pound Outlook

Analysts at FX News Today noted: If U.K. labor data proves less aggressive than markets anticipate, expectations for a rate cut in November will rise, which could place negative pressure on the pound.

The Japanese yen rose in Asian markets on Tuesday against a basket of major and minor currencies, extending gains for the second consecutive day versus the U.S. dollar and reaching its highest level in a week. The yen was supported by ongoing selling of the U.S. currency as Donald Trump continued to pressure the Federal Reserve for deeper interest rate cuts.

The Bank of Japan meets on Thursday and Friday to discuss monetary policy for the world’s fourth-largest economy, with expectations that rates will remain unchanged for the fifth consecutive meeting.

Price Overview

The dollar fell 0.25% against the yen to ¥146.99, its lowest since September 9, down from the opening at ¥147.35, after touching a high of ¥147.54.

The yen ended Monday up 0.2% versus the dollar, its second gain in three sessions, on rising expectations of U.S. rate cuts.

U.S. Dollar

The dollar index fell 0.2% on Tuesday, extending losses for the second session and hitting a two-month low at 97.16, reflecting the continued decline of the U.S. currency against a basket of global peers.

This drop is attributed to active selling ahead of an expected Fed decision on Wednesday to cut interest rates by 25 basis points.

Meanwhile, U.S. President Donald Trump intensified pressure on Fed policymakers, calling on Chair Jerome Powell in a Monday social media post to deliver a “larger” rate cut, citing risks in the U.S. housing market.

Bank of Japan

The central bank will convene Thursday to discuss policy for the world’s fourth-largest economy, with decisions due Friday.

Current pricing suggests a roughly 20% chance of a 25-basis-point rate hike.

With expectations firmly anchored on no change for a fifth straight meeting, attention will also be on Governor Kazuo Ueda’s comments about the future policy path.