The U.S. dollar is trading with a slightly weaker tone against most of the G10 peers as markets await the release of August PPI. The yen and Canadian dollar are underperforming, standing out as the laggards. Two developments dominate the headlines: a federal judge has temporarily blocked President Trump’s effort to remove Fed Governor Cook, ensuring her vote in the upcoming FOMC meeting, with Miran likely to be confirmed in time as well. Fed funds futures show the odds of a 50 bp rate cut have climbed modestly. Meanwhile, geopolitical risk resurfaced after Poland intercepted Russian drones in its airspace, prompting pressure on Polish assets and other central European currencies.
In Japan, dollar-yen has remained contained, oscillating within a narrow corridor around JPY147.25–147.60 after slipping to lows near JPY146.30 yesterday before recovering. Political reshuffling ahead of a new prime minister has not altered the perception that the BOJ may still raise rates, though market pricing of tightening has softened slightly compared with last month. The Australian dollar continues to battle with the $0.6600 threshold. Yesterday it briefly rose to $0.6620 before sliding back under $0.6590, echoing July’s failed breakout. After another dip toward $0.6580, the currency has again reclaimed $0.6600 by midday in Europe, showing that bullish momentum has not disappeared despite repeated setbacks.
The euro recently touched $1.1780, its strongest since last summer, before slipping to fresh weekly lows near $1.1685. It has since rebounded toward $1.1720 but appears to be stalling as momentum fades. Support lies near $1.1675, while a break below $1.1650—where significant option interest sits—could spark further selling. Attention now shifts to tomorrow’s ECB meeting, though no policy move is expected. Meanwhile, President Macron appointed Defense Minister Lecornu as prime minister, though his durability remains uncertain. In the U.K., sterling failed again to decisively overcome the $1.36 barrier, easing back toward $1.3520. Traders see potential for another retreat toward the $1.3460–90 zone as short-term pressure builds.
The Dollar Index has been trying to stabilize after hitting six-week lows near 97.25 yesterday, just above the late-July trough. It has since bounced to 97.95 before settling closer to 97.75. A move above 98.25 would be significant technically. With the benchmark payroll revisions now behind, market focus turns squarely to inflation releases. PPI is expected to rise 0.3% at both the headline and core levels, holding the annual headline rate steady at 3.3% while the core slips to 3.5%. Tomorrow’s CPI is forecast at 2.9%, the highest since February. Meanwhile, funding pressures are evident, with SOFRA at summer highs, reverse repo balances shrinking, and Treasury auctions adding to liquidity strains ahead of the September 15 tax date.