Dollar drifts ahead of FOMC appointment; sterling awaits BoE meeting

Investing.com - The U.S. dollar drifted in a narrow range Wednesday as attention turned towards who U.S. President Donald Trump would choose to fill a vacancy on the Federal Reserve’s Board of Governors.

At 03:50 ET (07:50 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 98.527, in subdued activity after the currency registered its largest one-day percentage fall in nearly four months on Friday following the weak jobs report.

Trump’s Fed appointment in spotlight

The greenback has struggled to recover from the slump late last week after the disappointing jobs report, with data on Tuesday showing the U.S. services sector activity unexpectedly flatlined in July even as input costs climbed by the most in nearly three years, underscoring the hit from Trump’s tariffs on the economy.

Traders continue to price in around a 90% chance of a Fed cut in September, with about 56 basis points worth of easing expected by the year-end.

There’s little in the way of significant economic data due Wednesday, and thus attention is firmly focused on who the U.S. president chooses to replace resigning Fed board member Adriana Kugler, with Trump saying on Tuesday he will decide on a nominee by the end of the week.

“Trump’s open attacks on the Bureau of Labor Statistics over payroll revisions have not had much market impact, but it will be interesting to see whether the selected Fed chair candidate echoes that narrative,” said analysts at ING, in a note. 

“If so, it could ignite fears of a disconnect between Fed policy and official data - a scenario we see as decidedly dollar-negative.”

Sterling awaits BoE meeting 

In Europe, EUR/USD edged higher to 1.1576, even after German industrial orders unexpectedly fell in June, declining for a second straight month, due to falling demand from abroad.

Orders were down by 1% on the previous month, much weaker than the expected rise of 1.0%. 

Eurozone retail sales are expected to rebound 0.4% on a monthly basis in June from the previous month’s drop of 0.7%, with the data due for release later in the session.

“EUR/USD remains almost entirely driven by the dollar leg, and we continue to see decent upside potential mostly on the back of the Fed’s dovish repricing rather than any supportive eurozone story,” said ING.

GBP/USD slipped slightly to 1.3295, trading in a tight range ahead of this week’s policy-setting meeting of the Bank of England.

The U.K.’s central bank is widely expected to cut its key interest rate to 4% from 4.25% on Thursday and to lower it once more before the end of the year, despite consumer price inflation rising to close to double the central bank’s 2% target in June.

Indian rupee stabilizes after RBI stands pat

Elsewhere, USD/JPY traded marginally higher to 147.66, following weaker-than-expected average cash earnings data for June, which pointed to sluggish wage growth, which could in turn herald some cooling in inflation. 

AUD/USD rose 0.4% to 0.6489, recovering further from a recent fall to one-month lows, while USD/CNY gained 0.1% to 7.1891, with focus on more U.S. tariffs against the country over Beijing’s continued buying of Russian oil.

USD/INR fell 0.1% to 87.697, after briefly surging to a record high over 88 rupees earlier this week.

The Indian currency saw some relief after the Reserve Bank of India (NSE:BOI) left interest rates unchanged at 5.50%, defying some market expectations that it would cut rates further. 

Expectations for a cut had stemmed from increasing headwinds for the Indian economy, especially from higher U.S. trade tariffs. 

The RBI has cut rates by a cumulative 1% so far in 2025.