Dollar pressured by Fed rate cut bets

The dollar index steadied near 97.6 on Friday but stayed under pressure as the latest inflation print came in line with expectations, giving the Federal Reserve room to ease policy amid a slowing labor market.

The August CPI report showed consumer prices rising 0.4% on the month, slightly above forecasts, while the annual rate held at 2.9%, matching expectations.

Jobless claims jumped 27K to 263K, the highest since 2021, underscoring a softer jobs backdrop. Traders are pricing in a roughly 93% chance of a 25 basis point cut at the Fed’s September 17 meeting, with odds of a larger half-point move edging higher.

In policy developments, the US and Japan issued a joint statement stressing that exchange rates should remain market-driven and excessive volatility is undesirable.

Meanwhile, the European Central Bank kept its benchmark rate unchanged at 2% for the second consecutive meeting. The dollar is on course to finish the week slightly lower.