Dollar Depreciates Amid Fed Rate Speculations and International Trade Tensions

The dollar slumped to a five-week low as investors assess U.S. labor data and anticipate Federal Reserve moves. International trade dynamics and political risks in Europe are affecting currency markets, compounded by U.S. President Trump's tariff policies and influence over the Fed.

The dollar plunged to its lowest level in five weeks as investors brace for significant U.S. labor market data poised to influence the Federal Reserve's monetary strategy. Friday's inflation insights and a pivotal court ruling on President Trump's tariffs also play into current market dynamics.

Currently, money markets indicate a strong prospect for a 25 basis-point rate cut by the Fed in September, with further easing anticipated by autumn 2026. The dollar recently eased against a basket of currencies, marking its weakest performance since late July, and reflecting a broader economic softening in the U.S.

Political tensions amplify these market conditions, as France faces internal budgetary disputes, affecting the euro. Meanwhile, U.S. trade policy remains a focal point as negotiations persist globally, amidst concerns over President Trump's impact on Fed policy autonomy.

(With inputs from agencies.)