The U.S. dollar edged a bit higher on Monday as market participants focused on the upcoming Federal Reserve policy meeting, expected to shape currency trends heading into the final quarter of the year.
At 04:10 ET (08:10 GMT), the Dollar Index, which measures the greenback against six major currencies, rose 0.1% to 97.175, after having declined more than 10% so far in 2025.
Dollar eyes Fed decision
The Federal Reserve will wrap up its two-day policy meeting on Wednesday, and a rate cut is widely anticipated following recent data pointing to continued weakness in the U.S. labor market and softer-than-expected inflation in August.
Markets currently price in a 96.4% likelihood of a 25-basis-point cut and a 3.6% probability of a 50-basis-point reduction, according to CME FedWatch.
“We see the dollar staying gently offered into the meeting, and it could sell off a little further should a 50bp cut at the meeting prove a closer call than most expect,” noted analysts at ING in their commentary.
In addition to the Fed meeting, attention will turn to Tuesday’s U.S. retail sales figures for August, as well as weekly jobless claims and July Treasury International Capital data on Thursday.
“Last week’s jump in jobless claims briefly hit the dollar, and the TIC data will be scrutinised for any signs that foreign investors are not just hedging U.S. assets, but outright selling them,” ING added.
Euro struggles amid French political uncertainty
EUR/USD traded slightly lower at 1.1732, as the euro struggled to capitalize on U.S. dollar softness amid ongoing political uncertainty in France, including Fitch’s Friday downgrade of French debt by one notch to A+.
Locally, markets are watching how quickly, if at all, new French Prime Minister Sebastien Lecornu can unify the fragmented National Assembly to implement the unpopular yet necessary fiscal consolidation measures.
“Expect FX market players to keep one eye on French debt, even though our core view is that this is not going to broaden into another eurozone crisis,” ING said.
GBP/USD rose 0.2% to 1.3582, with sterling supported ahead of Thursday’s Bank of England meeting. The BoE cut rates last month for the fifth time in just over a year, but is widely expected to hold steady later this week, as inflation in July reached 3.8%—the highest among G7 economies and nearly double the UK central bank’s medium-term target. Recent data also showed U.K. growth stagnated in July following a strong first half of 2025.
Yuan weakens amid mixed Chinese data
Elsewhere, USD/JPY slipped 0.1% to 147.48 amid holiday-impacted trading in Japan for “Respect for the Aged” day.
USD/CNY edged lower to 7.1233, weighed down by weak Chinese economic data. Industrial production and retail sales both grew less than expected in August, while fixed asset investment also lagged projections. China’s unemployment rate unexpectedly rose to 5.3% in August, following last week’s soft inflation data, reinforcing disinflationary pressures.
AUD/USD added 0.2% to 0.6662, building on last week’s gains as the Australian dollar benefited from rising commodity prices.
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