Dollar Slips As Rate Cut Hopes Deepen

(RTTNews) - The U.S. Dollar declined during the week ended September 12 amidst renewed hopes of a rate cut by the Federal Reserve on September 17. The decline happened in the backdrop of a massive downward annual revision to non-farm payrolls, an unexpected decline in producer prices, a huge jump in initial jobless claims as well as the mostly in-line consumer price inflation readings in the U.S.

The greenback declined against the euro, the British pound, the Australian Dollar, the Swedish krona as well as the Swiss franc. The U.S. dollar however held firm against the Japanese yen and the Canadian dollar. The Dollar Index which measures the Dollar's strength against a basket of 6 currencies dropped close to a quarter percent during the past week.

From the level of 97.77 on September 5, the Dollar Index slipped 0.23 percent in a week's time. The Index which had touched a weekly low of 97.25 on Tuesday climbed to the weekly high of 98.09 by Thursday in the aftermath of the CPI readings. The Index however dropped again and closed the week's trading at 97.55.

Data released by the U.S. Bureau of Labor Statistics on Tuesday had shown that the U.S. economy added 911 thousand lower number of jobs in the 12 months through March 2025 than initially reported. In the largest downward revision since at least 2000, nearly all sectors added fewer jobs than initially estimated, implying that the labor market has weakened more than previously indicated. The labor market update renewed expectations of significant monetary easing by the Fed.

Rate cut expectations were further boosted by the unexpected decline in producer price inflation in the U.S. Data released on Wednesday morning by the U.S. Bureau of Labor statistics had shown headline monthly producer price inflation unexpectedly recording -0.1 percent in August from a downwardly revised 0.7 percent in the previous month. Markets had anticipated a level of 0.3 percent. The monthly core inflation, the headline annual inflation as well as the core annual inflation, all came in much lower than expected.

Data released by the U.S. Bureau of Labor Statistics on Thursday showed headline annual consumer price inflation rising as expected to 2.9 percent from 2.7 percent in July. The core component remained steady at 3.1 percent matching expectations. On a month-on-month basis, headline consumer price inflation increased to 0.4 percent from 0.2 percent in July. Markets had expected it to edge up to 0.3 percent. The core component however remained steady at 0.3 percent as expected.

Data released on Thursday by the U.S. Department of Labor also showed the initial jobless claims surging to 263 thousand in the first week of September. The highest level since October 2021 was well above the market consensus of 235 thousand and boosted hopes of action by the Fed to arrest the weakness in the labor market.

Amidst the dollar's weakness triggered by strong hopes of easing by the Federal Reserve, the monetary policy pause by the European Central Bank as well as the uncertain political situation in France, the EUR/USD pair rallied 0.13 percent during the week ended September 12. From the weekly high of 1.1780 touched on Tuesday, the pair dropped to a low of 1.1663 on Thursday. The pair eventually closed at 1.1734, versus 1.1719 a week earlier.

The British pound also gained against the greenback during the week ended September 12. The GBP/USD pair which had closed at 1.3510 on September 5 gained 0.36 percent during the week ended September 12 to close at 1.3558. The weekly trading range was wider, between a low of 1.3481 recorded on Monday and a high of 1.3592 recorded on Tuesday. Data released during the week had shown that the British economy stalled as expected in July after expanding 0.4 percent in June.

The Australian Dollar jumped 1.42 percent against the U.S. Dollar during the past week pricing in hopes that the Fed would resume its rate-cutting cycle. The pair rose from the level of 0.6557 recorded on September 5 to close the week ended September 12 at 0.6650. During the week, the pair oscillated between a low of 0.6545 recorded on Monday and the high of 0.6670 recorded on Friday.

The U.S. Dollar rallied mildly against the Japanese Yen during the week ended September 12 amidst speculation about the Bank of Japan's monetary policy stance and action. The USD/JPY pair closed the week at 147.67 versus 147.41 a week earlier, registering a gain of 0.18 percent. The pair ranged between a high of 148.58 recorded on Monday and a low of 146.31 recorded on Tuesday.

Ahead of the widely anticipated interest rate decision by the Federal Reserve on Wednesday, the 6-currency Dollar Index has eased. It is currently trading at 97.36 versus 97.55 at close on Friday.

The EUR/USD pair is currently at 1.1770 versus 1.1734 on Friday. Ahead of Bank of England's interest rate decision on Thursday, the GBP/USD pair has rallied to 1.3617 from 1.3558 on Friday. The AUD/USD pair has moved to 0.6664 from 0.6650 at close on Friday.

The USD/JPY pair has slipped to 147.36 from the level of 147.67 recorded at the end of the previous week while markets eagerly wait for Bank of Japan's interest rate decision on Thursday.