FX.co ★ Dollar Starts Q3 on a Weak Note

On the first trading day of the latter half of 2025, the dollar index reduced its earlier losses but still traded lower, settling around 96.7. This figure positions it near its lowest point since 2022, following a notable 10% decline in the first half of the year. Market participants are closely scrutinizing the monetary policy developments, especially after Federal Reserve Chair Jerome Powell maintained a "wait-and-see" approach at the ECB Forum on Central Banking. Powell indicated that while inflation is forecasted to rise over the summer, the Fed remains patient in its response. He also pointed out that a majority of Fed officials deem it likely that cutting interest rates later this year would be appropriate. At present, the markets have priced in a 25 basis points rate reduction in September, with expectations building for two more cuts by the end of the year. Additionally, investors are keeping an eye on the progress of trade negotiations with major partners, as the Treasury Secretary anticipates that the Senate will pass the budget legislation by Tuesday afternoon.