The dollar traded sideways on Thursday. Investors increased their expectations for a rate cut after New York Fed President John Williams indicated that a rate cut in September was possible.
Williams said in an interview with CNBC that rates could fall, but that upcoming economic data would be decisive.
Especially this week’s PCE inflation data and the subsequent employment report will be critical for the Fed’s September 16-17 meeting.Markets expect a 25 basis point cut with an 89% probability in September. These expectations have pushed 2-year Treasury bond yields to their lowest level since May 1, putting downward pressure on the dollar.
The dollar is also negatively affected by Trump’s attempts to increase his influence over the Fed. President Trump’s effort to remove Fed Governor Lisa Cook and replace her with his own nominee could turn into a legal battle.
According to experts, this step accelerated the decline in short-term returns and sent a negative signal for the dollar. The dollar index closed slightly higher at 98.22, trading at 1.1630 against the euro and 147.34 against the yen. However, the dollar fell to its lowest level against the Chinese yuan since November.
