The U.S. dollar moved within a tight range on Wednesday as markets focused on who President Donald Trump will nominate to fill a seat on the Federal Reserve’s Board of Governors.
As of 03:50 ET (07:50 GMT), the U.S. Dollar Index, which tracks the greenback’s performance against six major currencies, was down 0.1% at 98.527. The dollar has been relatively quiet following its sharpest single-day drop in nearly four months last Friday, driven by a weaker-than-expected U.S. jobs report.
Spotlight on Trump’s Pick for the Fed
The dollar has struggled to find direction since last week’s labor data disappointment. Adding to the cautious sentiment, figures released Tuesday revealed that U.S. services sector activity stagnated in July, even as input prices surged at their fastest pace in nearly three years — another sign that tariffs may be weighing on the economy.
Traders are maintaining their bets on a Federal Reserve rate cut in September, with futures pricing in around a 90% probability and projecting roughly 56 basis points of easing by year-end.
With few major economic indicators due Wednesday, all eyes are on the White House as markets await Trump’s nomination to replace outgoing Fed board member Adriana Kugler. The president said on Tuesday that he plans to name a candidate before the end of the week.
“Trump’s open attacks on the Bureau of Labor Statistics over payroll revisions have not had much market impact, but it will be interesting to see whether the selected Fed chair candidate echoes that narrative,” analysts at ING wrote in a note.
“If so, it could ignite fears of a disconnect between Fed policy and official data – a scenario we see as decidedly dollar-negative.”
Euro Inches Higher; Pound Cautious Before BoE
In Europe, the euro ticked up, with EUR/USD climbing to 1.1576 despite a disappointing German industrial orders report. Orders unexpectedly declined by 1% in June, marking a second consecutive monthly drop due to weaker demand from overseas. Economists had forecast a 1.0% increase.
Later in the session, investors will watch for Eurozone retail sales data for June, with expectations for a 0.4% monthly rebound after May’s 0.7% decline.
“EUR/USD remains almost entirely driven by the dollar leg, and we continue to see decent upside potential mostly on the back of the Fed’s dovish repricing rather than any supportive eurozone story,” said ING.
Meanwhile, GBP/USD dipped slightly to 1.3295, trading in a narrow band as investors braced for the Bank of England’s policy decision on Thursday. The BoE is widely expected to lower its benchmark rate from 4.25% to 4%, and another cut is anticipated before year-end, even as inflation hovered near twice the bank’s 2% target in June.
Indian Rupee Rebounds After RBI Decision
In Asia, USD/JPY edged up to 147.66 after soft Japanese wage growth figures for June, which could signal slowing inflation in the coming months.
The Australian dollar regained ground, with AUD/USD rising 0.4% to 0.6489, following a recent slide to one-month lows. In contrast, USD/CNY gained 0.1% to 7.1891, amid speculation of further U.S. tariffs in response to China’s ongoing purchases of Russian oil.
The Indian rupee showed some resilience, with USD/INR falling 0.1% to 87.697, retreating from a record high above 88 seen earlier this week. The currency found support after the Reserve Bank of India (RBI) left interest rates unchanged at 5.50%, contrary to market expectations for further easing.
Investors had anticipated another rate cut due to increasing economic pressures, particularly from rising U.S. trade barriers. So far in 2025, the RBI has reduced rates by a total of 100 basis points.
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