Dollar Weakens Ahead of Fed Meeting

The U.S. dollar hovered near its lowest levels in over a year against the euro and sterling on Thursday, influenced by a dovish stance from the Federal Reserve and emerging signs of weakness in the U.S. job market. The dollar fell below the critical 145 yen mark as U.S. Treasury yields declined, with traders awaiting the release of weekly jobless claims data and a key speech from Fed Chair Jerome Powell at the Jackson Hole symposium on Friday. The dollar index remained relatively stable at 101.14, dipping to 100.92 overnight for the first time this year. The euro held steady at $1.1154 after reaching $1.1130 on Wednesday, marking its highest point since July 2022. Similarly, sterling remained unchanged at $1.3092 after climbing to $1.31195, a level not seen since July 2023. Recent minutes from the Fed's July meeting indicated a strong inclination among officials towards interest rate cuts, with some advocating for immediate reductions. Additionally, a Labor Department report revealed that job additions were significantly lower than previously reported for the year ending in March. Market expectations for rate cuts have shifted, with a 38% probability of a 50 basis point cut at the Fed's upcoming meeting, up from 33% the previous day. Economists suggest a more conservative 25 basis point cut is likely, given the overall health of the U.S. economy. Meanwhile, the dollar slipped to 145.09 yen, as traders sought clarity on Japanese monetary policy amid mixed signals from Bank of Japan officials.