FX.co ★ Dollar Pressured by Fed Rate Cut Bets

The dollar index steadied around 98.1 on Thursday, retracting previous session's intraday gains as traders ramped up expectations for Federal Reserve interest rate cuts. The probability of a 25 basis point reduction in September has risen from 82% last week to roughly 89% currently. This shift follows President Donald Trump’s broadened influence over the Federal Reserve, highlighted by his attempt to replace Fed Governor Lisa Cook with a more dovish candidate. Further adding to the dovish sentiment, New York Fed President John Williams indicated on Wednesday that a rate cut was under consideration. In anticipation, investors are closely watching Friday’s release of the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred measure of inflation, for additional policy direction. Externally, despite challenges such as French Prime Minister François Bayrou's unexpected call for a confidence vote that could potentially bring down his minority government, the euro gained ground against the dollar.