The U.S. dollar experienced its second consecutive decline on Wednesday because market participants increasingly believe the Federal Reserve will implement interest rate reductions in September. The dollar index decreased 0.2% to 97.81 which marked its lowest point since July and followed Tuesday’s 0.5% decline.
The July U.S. consumer price index data revealed a modest increase that matched expectations while showing no significant effects from President Donald Trump’s broad tariff implementation. The market now predicts a 98% chance of Federal Reserve interest rate reduction in September with Treasury Secretary Scott Bessent advocating for a 50-basis-point decrease as the first step in multiple rate cuts.
The Federal Reserve faces increasing political pressure from various directions. The White House reports that President Donald Trump is exploring legal options against Fed Chair Jerome Powell regarding Washington headquarters renovations despite his frequent criticism of Powell. The tactics used by these economies resemble those of autocratic regimes which damage central bank independence according to analysts.
The recent market developments fail to create positive expectations about the dollar’s future performance according to Commerzbank’s Michael Pfister. The President of the United States directed his criticism at Goldman Sachs CEO David Solomon by claiming the bank failed to properly assess tariff effects and questioned his leadership abilities.
