Dollar Firms Slightly After Trump’s Fed Pick, But Weekly Loss Signals Rate Cut Bets
Stephen Miran’s appointment as temporary Fed governor fuels expectations of September interest rate cuts and keeps the U.S. dollar under pressure.
Washington, August 8 EST: The U.S. dollar managed a faint recovery on Friday, with the dollar index inching up to about 98.15. That uptick barely 0.1% wasn’t enough to erase a rough week, leaving the currency on track for a 0.6% loss. In currency terms, that’s not noise. It’s a shift in conviction about where the Federal Reserve is headed next.
A Fed Seat With a Market Signal Attached
The move came in the shadow of President Donald Trump’s decision to tap Stephen Miran as a temporary Fed governor, filling the seat left open by Adriana Kugler’s resignation. Miran isn’t an unknown name on Wall Street or in Washington. He’s the current head of the Council of Economic Advisers, a former Treasury official, and someone who has made it clear in past remarks that he favors easier policy when growth looks tired.
For traders, this wasn’t just a personnel change it was a policy signal. Rates might come down sooner, and possibly more than the Fed was willing to admit even a month ago. Futures markets now price in a 93% chance of at least one cut in September, with more expected by year-end.
When a central bank is seen leaning dovish, the currency tied to it usually softens. This week was no exception.
Weak Job Data Tightens the Lens
Economic fundamentals have done their own damage to the dollar. Hiring is slowing, job openings have thinned, and wage growth is backing off its post-pandemic highs. It’s not crisis territory, but it’s the kind of slow drip that makes a central bank think twice about keeping rates high.
Investors will tell you often over coffee at 6 a.m. before the European open that labor market cooling is a louder warning sign than most policymakers admit. If it continues, the argument for cuts writes itself. Still, all bets could shift if next week’s inflation report shows prices heating up again.
A Trend That’s Hard to Ignore
The dollar index has been in a steady slide since mid-July, weighed down most heavily against the yen and the euro. It’s not just sentiment; it’s positioning. Traders who earlier this year talked about “higher for longer” rates are now building portfolios for cheaper money.
Think of it like a company that pivoted from expansion to cost-cutting the mood changes overnight, and so does the playbook.
Ripples Beyond Currencies
A softer dollar is a tailwind for emerging market currencies and a lift for commodities. This week, gold ticked up and oil found a floor, even as demand forecasts stayed mixed. For U.S. assets, the picture is less straightforward. Treasury yields are slipping, equity markets are choppy, and foreign capital isn’t chasing American returns with the same urgency.
For corporate CFOs, a weaker dollar can be a double-edged sword: it fattens overseas earnings when converted back to dollars, but it also raises the cost of imported goods and raw materials.
Eyes on CPI
The next real catalyst is Wednesday’s Consumer Price Index. A soft reading could all but lock in a September cut. A hotter print could throw cold water on the dovish talk at least until the next labor market release.
For now, the dollar’s modest Friday bounce looks more like a pause than a reversal. In boardrooms, trading desks, and yes, those late-night startup pitch calls, the question isn’t whether the Fed will cut it’s how far and how fast.
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A Wall Street veteran turned investigative journalist, Marcus brings over two decades of financial insight into boardrooms, IPOs, corporate chess games, and economic undercurrents. Known for asking uncomfortable questions in comfortable suits.
