Dollar Dips Amid Fed Rate Cut Speculation

The dollar fell and the euro rose as traders anticipated more rate cuts than expected from the Federal Reserve. Sluggish U.S. job data fueled these expectations, increasing the probability of future rate cuts. Market focus also turned to President Trump's upcoming Fed nominations.

The U.S. dollar took a hit on Wednesday, plummeting as the euro climbed to a one-week high. This shift came amid increased speculation that the Federal Reserve will implement more rate cuts than initially anticipated this year, following unexpectedly weak job data for July. With no major U.S. economic announcements on Wednesday, traders focused on the potential repercussions of Friday's jobs report.

July's U.S. employment growth fell short of expectations, with nonfarm payrolls for the previous two months revised down by a significant 258,000 jobs, indicating a stark weakening in labor market conditions. As a result, the dollar's prior gains from a relatively strong July, the first positive month for the dollar index this year, were sharply reduced.

Further speculation about rate cuts grew, with traders predicting a 25 basis point reduction at the Fed's September meeting. In light of the sluggish U.S. economy, Minneapolis Fed President Neel Kashkari suggested that interest rate cuts might soon be necessary despite uncertain effects from tariffs on inflation. Concurrently, President Trump aims to nominate a new Fed Chair, escalating market attention.

(With inputs from agencies.)