Markets Await Inflation Data for Rate Cut Clues
The U.S. dollar traded largely steady on Wednesday as investors awaited a string of inflation reports that could determine the size of the Federal Reserve’s expected interest rate cut at its September 16–17 meeting.

Following last week’s weak nonfarm payrolls report, markets are fully pricing in a 25-basis-point cut and assigning a slim 5% chance to a larger 50 bps move, CME FedWatch showed. Traders also anticipate around 66 bps of easing through the rest of 2025.

Producer price data is due later Wednesday, followed by consumer price inflation figures on Thursday, which are expected to provide key insight into how much Trump’s recent tariffs have filtered into broader prices.

Dollar Holds Ground, Euro and Sterling Flat
In Asian trade, the dollar index was unchanged at 97.834 after gaining 0.3% on Tuesday. The euro hovered at $1.17115 and sterling at $1.3534. The yen was flat at 147.41 per dollar.

The Australian dollar rose 0.3% to $0.66065, close to a seven-week high touched on Tuesday, while the greenback has lost nearly 10% year-to-date amid erratic U.S. trade policy and rising expectations of lower interest rates.

Fed Independence Battle Adds Uncertainty
Investor sentiment was also tempered by political drama after a U.S. court temporarily blocked President Donald Trump’s attempt to fire Federal Reserve Governor Lisa Cook. The unprecedented legal fight is expected to head to the Supreme Court, fueling worries over the central bank’s independence.

Meanwhile, data on Tuesday showed the U.S. economy created 911,000 fewer jobs between March 2023 and March 2024 than previously estimated, suggesting the labor market had been weakening even before the latest wave of tariffs.

Geopolitical Tensions in Focus
Markets were also on edge after Poland scrambled NATO air defenses to shoot down drones following a Russian strike on western Ukraine.

Investors are watching political developments abroad as well, with France preparing to appoint its fifth prime minister in under two years after François Bayrou’s ouster, and Japan navigating leadership uncertainty following Shigeru Ishiba’s resignation as prime minister.

Elsewhere, Indonesia’s rupiah stabilized after tumbling 1% on Tuesday following the surprise removal of Finance Minister Sri Mulyani Indrawati, a move that rattled investors in Southeast Asia’s biggest economy.