Dollar Dips Amid Fed Rate Cut Expectations and Political Pressure

The dollar began Thursday under pressure as traders increased wagers for a possible Federal Reserve interest rate cut next month. This follows remarks from New York Fed chief John Williams, who indicated that a cut could be feasible.

Further strain on the U.S. currency came from President Donald Trump's intensified campaign to assert more control over monetary policy decisions. Trump's move to replace Fed Governor Lisa Cook with a loyalist heightened tensions. Despite France's prime minister unexpectedly calling a confidence vote, which could see his minority government fall, the dollar weakened against the euro.

The dollar index, tracking the currency against six major peers, held steady at 98.135 after two days of declines. Meanwhile, traders are betting heavily on a rate cut, with an 84% likelihood for a quarter-point reduction next month, contributing to a downward tilt in two-year Treasury yields and adding pressure on the dollar.

(With inputs from agencies.)