U.S. Dollar Holds Gains as Markets Await Fed Data and Tariff Impact

The U.S. dollar remained steady on Thursday, consolidating overnight gains as traders assessed the likelihood of a measured Federal Reserve easing cycle. Recent comments from policymakers, including Chair Jerome Powell, signaled caution, with future moves depending heavily on incoming inflation and labor data.

Markets currently price in about 43 basis points of rate cuts across the Fed’s two remaining meetings this year. However, traders are no longer fully expecting a cut next month. Since the Fed’s widely anticipated rate reduction last week, the dollar has edged higher, supported by lingering uncertainty about the timing of further easing.

In currency markets, the euro was last at $1.17425, steady after a 0.6% drop in the prior session, while sterling hovered at $1.3451 following a similar decline. The dollar index stood at 97.813, close to a three-week high and on track for monthly gains.

San Francisco Fed President Mary Daly echoed the cautious stance, suggesting more cuts may be necessary but stressing the timing remains unclear. “Will they come right now, this year or going forward? It’s hard to say,” she noted, underscoring the Fed’s data-dependent approach.

Attention now turns to key U.S. economic reports, including Thursday’s final second-quarter GDP estimate and Friday’s Personal Consumption Expenditures (PCE) index, the Fed’s preferred inflation gauge. Investors remain watchful of tariff impacts, which so far have not been fully reflected in economic data. Strategists like Nuveen’s Laura Cooper warn that tariff-led price pressures could keep inflation elevated near 3.2% later this year, complicating the Fed’s path.

In Asia, the yen firmed slightly to 148.62 per dollar after Bank of Japan minutes revealed some policymakers backing future rate hikes. Markets are split on the chance of a hike at the BOJ’s October 29–30 meeting. Meanwhile, the New Zealand dollar rose 0.1% to $0.5813, and the Australian dollar held at $0.65905.