The dollar held steady on Friday but was heading for a weekly decline, down 0.6%, as markets digested President Donald Trump's temporary appointment to the Federal Reserve and growing expectations of a dovish shift in monetary policy.
Trump nominated Stephen Miran, Chair of the Council of Economic Advisers, to fill a vacant Fed seat following the surprise resignation of Governor Adriana Kugler. This move comes as speculation builds over who will replace Fed Chair Jerome Powell when his term ends in May.
Markets are pricing in at least two rate cuts by year-end, with a 93% probability of a cut in September, according to CME’s FedWatch tool. Concerns about weakening U.S. labor market data and slowing economic momentum have fueled those bets.
Despite Trump’s past criticism of Powell and pressure on the Fed to lower rates, analysts believe the central bank’s independence remains intact.
“We still maintain that central bank independence is going to be very much intact,” said Raisah Rasid, global market strategist at J.P. Morgan Asset Management.
Fed Governor Christopher Waller, who supported a rate cut at the last policy meeting, is emerging as a leading contender to succeed Powell, Bloomberg reported.
The dollar index (DXY) was flat at 98.1 on the day and has fallen 9.5% so far this year.
Market Focus Shifts to CPI, Fed Signals
Next week's U.S. CPI report is expected to show core inflation rising 0.3% in July, potentially providing key input for the Fed’s policy meeting on September 16–17.
Atlanta Fed President Raphael Bostic cautioned that while risks to the labor market have increased, more data is needed before committing to rate cuts.
Sterling and Euro Gain, Yen Flat
The British pound rose near a two-week high at $1.3439 after the Bank of England delivered a rate cut in a close 5–4 vote, suggesting a less dovish outlook. It’s on track for its best week since late June.
The euro hovered near recent highs, while the yen remained stable at 147.1 per dollar.
Optimism over potential U.S.-Russia peace talks also supported risk sentiment. Kremlin aide Yuri Ushakov confirmed that President Trump and President Putin will meet soon for the first time since 2021.
