Dollars, Doves & Data Drama: Fed Shaken, Euro Awakened, Sterling Steady.

  • Dollar weakness returns as soft US jobs data and Fed reshuffling revive rate cut bets.

  • Fed Governor Kugler resigns early, allowing Trump to install a likely dove before Powell’s term ends in May 2026.

  • BLS chief sacked over data integrity concerns, adding uncertainty to US markets and risk premium to Treasuries.

  • Euro rallies on narrowing rate differentials, with EUR/USD eyeing 1.1700 if sentiment holds.

  • Sterling steady ahead of BoE; minor gains possible if the bank eases up on QT and gilt sales.

USD: Fed Doubts Stir Dollar Slide
Friday’s disappointing US jobs report halted the dollar’s rebound, prompting markets to price in an 80% chance of a 25bp Fed rate cut in September. Adding to the uncertainty, Fed Governor Adriana Kugler unexpectedly resigned over the weekend—months before her term was due to end. This opens the door for Donald Trump to appoint a dovish successor who could potentially replace Chair Jerome Powell when his term ends next May. Her early replacement could shift the Fed’s balance toward cutting rates.

Meanwhile, the dismissal of the Bureau of Labor Statistics head—accused of politically manipulating data—has cast a shadow over the reliability of US economic figures, a worrying sign for investor confidence in Treasuries and the dollar alike.

Investors will closely watch comments from key FOMC members (Collins, Cook, Musalem) midweek, along with Tuesday’s ISM services data. Though markets lean dovish, sticky inflation may still delay Fed action. The Jackson Hole symposium later this month remains key for further policy clarity.

We believe last week marked a short-term high for the dollar index (DXY), with any bounce likely capped around 99.20/50 before resuming a move down to 97.00.

EUR: Rising on Fed Doubts and Easing Gap
EUR/USD surged Friday as traders bet that Fed easing is back on the table, narrowing swap spreads with the eurozone. With European Central Bank rate cuts largely priced in, the dollar’s new vulnerability puts the euro in a stronger position.

Today’s Sentix investor confidence reading is expected to improve, and retail sales data out Wednesday should show a recovery from May’s slump. EUR/USD’s floor near 1.1400 looks solid, and dips into the 1.1500–1.1520 range are likely to attract buyers. The 1.1700 level seems a realistic upside target in the near term.

Elsewhere, Switzerland is reeling after being hit with 39% US tariffs. If the duties stick, they’ll further pressure already ultra-low inflation. EUR/CHF has started to tick higher but likely won’t rally meaningfully until the ECB concludes its easing cycle—something not expected until 2026.

GBP: Sterling Finds Its Range Ahead of BoE
This Thursday’s Bank of England meeting is unlikely to drastically shift the pace of rate cuts. That should keep EUR/GBP hovering near the 0.8700 mark.

However, if the BoE announces a slower pace of quantitative tightening—e.g., £75bn per year instead of £100bn—and reduces long-dated gilt sales, it could ease pressure on UK sovereign debt markets and offer modest support to sterling.

Overall, we expect EUR/GBP to consolidate between 0.8650 and 0.8700 this week.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.