The dollar index (DXY) dropped by 0.43% on Tuesday, reflecting increased expectations for a Federal Reserve rate cut, which rose to 96% for the September meeting following the US Consumer Price Index (CPI) report. The July CPI showed a monthly increase of 0.2% and an annual rate of 2.7%, mirroring June’s figure and slightly missing expectations of 2.8%. The core CPI rose 0.3% month-on-month and 3.1% year-on-year, exceeding the projected 3.0%.
Federal funds futures are indicating a 96% probability of a 25 basis point rate cut at the September 16-17 Federal Open Market Committee meeting. Meanwhile, President Trump extended a tariff truce with China for an additional 90 days and announced plans for a 100% tariff on semiconductor imports, while doubling tariffs on US imports from India to 50% due to oil purchases from Russia.
Sentiment on the euro remains cautious, even with EUR/USD rising by 0.52%. The USD/JPY fell 0.30% amid fears that US tariff policies may negatively impact the Japanese economy. Gold closed down 0.17% while silver gained 0.57%, supported partially by heightened chances for a Fed rate cut and ongoing geopolitical risks.
