The U.S. dollar slipped on Wednesday, giving back part of its recent strength after comments from Jerome Powell reinforced expectations for interest rate cuts, while the euro firmed as political developments in France lent support to the currency.
At 04:25 ET (08:25 GMT), the Dollar Index — which tracks the greenback against six major currencies — was down 0.3% at 98.545, paring some of the gains of more than 2% made over the past month.
Dollar pulls back after Powell speech
The greenback moved lower following Powell’s Tuesday address, during which the Federal Reserve Chair kept the door open to additional rate reductions, noting that the U.S. labor market “remained in the doldrums.”
Markets are now pricing in a 25-basis-point cut at the October 28–29 Fed meeting, another in December, and three more in 2026, according to LSEG data.
“Risk sentiment improved throughout Tuesday – boosted by strong U.S. bank earnings – before Powell’s speech added dovish-sounding headlines: slower payrolls, tolerable inflation, and a possible QT rollback,” analysts at ING Group said in a note.
“That said, the overall policy stance remains broadly unchanged from September. Fed pricing is steady at 48bp of easing for the rest of the year, and we doubt that will shift much before new inflation and jobs data arrive.”
Later in the day, investors will turn their attention to the Fed’s Beige Book, one of the few key economic releases available amid the prolonged U.S. government shutdown.
Euro strengthens ahead of no-confidence vote
In Europe, EUR/USD traded 0.3% higher at 1.1637 after a similar gain in the previous session, supported by political developments in France. Prime Minister Sébastien Lecornu, who was reappointed last Friday, presented the 2026 budget bill on Tuesday and pledged to postpone the government’s controversial pension reform — a central demand of the Socialist Party. In response, the Socialists said they would not support the no-confidence motion.
With Socialist backing, the government’s chances of passing the budget have improved, even though the parliamentary balance remains fragile.
“If Lecornu survives the no-confidence vote, EUR/USD could edge higher and potentially build strong support around 1.1600,” said ING.
GBP/USD climbed 0.2% to 1.3350, with the pound recovering from Tuesday’s dip after data showed wage growth cooling.
Yen and yuan gain ground
USD/JPY fell 0.4% to 151.30, helped by fading bets on looser fiscal policy under Sanae Takaichi. The Liberal Democratic Party leader now faces a leadership challenge after its coalition partner Komeito withdrew its support.
Meanwhile, USD/CNY edged down 0.2% to 7.1263, with the yuan supported by a stronger midpoint fix from the People’s Bank of China. Trade tensions continued to simmer after Beijing condemned U.S. President Donald Trump’s threat to impose 100% tariffs on Chinese goods. China’s commerce ministry said it was prepared to “fight to the end” if necessary.
Inflation figures released Wednesday showed a deeper-than-expected fall in consumer prices in September and a third straight year of deflation in producer prices. While core inflation rose to a 19-month high, signs of a broader recovery remained limited.
AUD/USD rose 0.5% to 0.6518, with the Australian dollar benefiting from the dollar’s weakness.
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