The U.S. dollar held steady on Monday ahead of Tuesday’s dual milestones: the deadline for a U.S.–China tariff agreement and a key U.S. inflation report that could influence whether the Federal Reserve cuts interest rates next month.
The dollar index dipped less than 0.1% to 98.164 after a 0.4% drop last week. Against the yen, it traded at 147.39, down 0.2%, with Japanese markets closed for the Mountain Day holiday. The euro edged up to $1.1652, while sterling remained unchanged at $1.3462.
The greenback remains under pressure as traders scale back expectations for aggressive Fed policy after weaker U.S. jobs and manufacturing data. Fed officials have expressed growing concern over the labor market, hinting at a possible September rate cut. Cooling inflation would strengthen that case, but any signs that Trump’s tariffs are adding to price pressures could delay such a move.
“Heading into tomorrow’s data, the bar for a hawkish surprise is higher,” said Francesco Pesole, FX strategist at ING. He noted that a 0.3% monthly rise in core CPI could give the Fed room to ease policy amid labor market weakness. Economists polled by Reuters forecast that core CPI rose 0.3% in July, lifting the annual rate to 3%. Money markets now price a 90% probability of a September cut, with 58 basis points of easing by year-end — equivalent to two quarter-point cuts and a one-in-three chance of a third.
Personnel shifts at the Fed are also weighing on the dollar as Trump prepares to nominate policymakers aligned with his dovish stance, including a potential successor to Chair Jerome Powell when his term ends in May.
Trade negotiations remain in focus as Trump’s August 12 deadline approaches. Markets largely expect another 90-day extension. U.S. officials told Reuters that chipmakers Nvidia and AMD have agreed to allocate 15% of China sales revenues to the U.S. government in exchange for semiconductor export licenses. “If this is Trump saying ‘15% and we’ll call it a day,’ that may not be too bad,” said Chris Weston, head of research at Pepperstone Group.
The offshore yuan hovered around 7.1854 per dollar after data showed China’s producer prices fell more than expected in July, while consumer prices were unchanged. The Australian dollar traded flat at $0.6520 ahead of a widely anticipated 25-basis-point rate cut by the RBA to 3.60% on Tuesday, following weak inflation and a 3½-year high in unemployment.
In cryptocurrencies, bitcoin surged to $122,308, near its July 14 record, after a Trump executive order allowed U.S. retirement accounts to hold crypto assets. Ether climbed to $4,346, its highest since December 2021.
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