Dollar Steady Amid Fed Rate Cut Expectations, Inflation Data Focus

The U.S. dollar stabilized in early Asian trading following an unexpected decline in August's Producer Price Index, reinforcing expectations that the Federal Reserve will cut interest rates at its upcoming September 16-17 meeting. Traders largely anticipate a 25 basis point cut, with only a small chance of a larger 50 basis point reduction, as markets await key inflation data later in the week to guide the Fed's decision. Despite recent weaker-than-expected job growth and concerns over tariffs impacting prices, analysts suggest that a significant rate cut would require a clear downside surprise in core inflation, given the Fed's preference for gradual easing and sticky services inflation. Political developments, including President Donald Trump's administration seeking to remove Federal Reserve Governor Lisa Cook and advancing Stephen Miran's nomination, add to market uncertainty around monetary policy. The dollar index remains steady but down about 10% in 2025 amid rate cut expectations and trade policy concerns, with other currencies like the euro, sterling, yen, and Australian dollar showing minor fluctuations. Overall, the upcoming inflation reports will be pivotal in shaping the Fed's rate path and the dollar's direction for the remainder of the year.