Dollar Falls to Two-Month Low Ahead of Fed Meeting and Retail Sales Data
The U.S. dollar dropped to its lowest level in more than two months on Tuesday as markets awaited the latest Federal Reserve policy meeting and key retail sales data.
At 04:25 ET (08:25 GMT), the Dollar Index — which tracks the greenback against six major currencies — traded 0.2% lower at 96.727, marking its weakest level since July.
Fed Rate Cut Expectations
The Fed is widely expected to cut interest rates by 25 basis points when the meeting concludes on Wednesday. Recent U.S. labor market weakness and softer-than-feared inflation in August have fueled expectations for looser policy.
Analysts at ING noted that the dollar “has started the week on the soft side,” pointing to both pre-positioning ahead of the Fed’s decision and a supportive external environment.
According to the CME FedWatch tool, markets priced a 96.4% chance of a 25 bps cut and a 3.6% chance of a larger 50 bps move.
Investors are also watching the release of August retail sales for clues about consumer spending amid the Trump administration’s volatile trade policies. Import price data will be closely analyzed to see whether exporters, U.S. businesses, or consumers are absorbing the cost of tariffs.
Euro and Sterling Advance
In Europe, EUR/USD rose 0.3% to 1.1794, ahead of Germany’s ZEW economic sentiment report. ING analysts said resistance levels around 1.1800–1.1830 may hold unless the Fed triggers a breakout.
The British pound climbed 0.2% to 1.3630, reaching a two-month high against the dollar. Data showed the U.K. unemployment rate held at 4.7% in July, near a four-year high, while pay growth slowed to 4.8%. The Bank of England is expected to keep rates unchanged this week after multiple cuts in the past year.
Yen Gains Before BOJ Decision
The Japanese yen strengthened, with USD/JPY falling 0.5% to 146.73. The Bank of Japan meets Friday and is likely to keep rates near 0.5%, but sticky domestic inflation could push the BOJ toward a rate hike as soon as October.
Yuan Supported by Beijing Stimulus
The Chinese yuan edged up 0.1% to 7.1147, supported by Beijing’s new stimulus pledges, including measures to boost consumption through “15-minute living circles” in major cities. Despite recent weak economic data, the yuan stayed close to its highest level since November 2024.
Aussie Dollar Near Highs
The Australian dollar traded 0.1% higher at 0.6671, hovering near 10-month highs, as risk appetite remained firm.
