Wed, Aug 6, 2025, 7:47 AM 4 min read
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The dollar index (DXY00) today is down by -0.37% at a 1-week low. Hawkish comments today from ECB Governing Council member Holzmann boosted EUR/USD to a 1-week high and undercut the dollar when he said he sees no need for the ECB to cut interest rates further. The dollar is also under pressure from increased expectations for a Fed rate cut after the recent weaker-than-expected US payroll and PMI reports. The dollar dropped to its lows today after Minneapolis Fed President Neel Kashkari said it may be appropriate to cut interest rates in the near term.
Also, questions about the Fed’s credibility continue to weigh on the dollar after Fed Governor Adriana Kugler resigned last Friday, which could prompt President Trump to nominate a new governor who is more dovish and could undermine Fed Chair Powell’s influence.
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Minneapolis Fed President Neel Kashkari said, “The economy is slowing and in the near term it may become appropriate to start adjusting the federal funds rate lower.”
In recent tariff news, President Trump said Tuesday that US tariffs on semiconductor and pharmaceutical imports would be announced “within the next week or so.” On Monday, Mr. Trump said that he would be “substantially raising” the tariff on US imports from India from the current 25% due to India’s purchases of Russian oil. Last Thursday, President Trump raised tariffs on some Canadian goods to 35% from 25% and announced a 10% global minimum, along with tariffs of 15% or higher for countries with trade surpluses with the US, effective after midnight on August 7. According to Bloomberg Economics, the average US tariff will rise to 15.2% if rates are implemented as announced, up from 13.3% earlier, and significantly higher than the 2.3% in 2024 before the tariffs were announced.
Federal funds futures prices are discounting the chances for a -25 bp rate cut at 94% at the September 16-17 FOMC meeting and 64% at the following meeting on October 28-29.
EUR/USD (^EURUSD) today is up by +0.44% at a 1-week high. The euro is moving higher today on hawkish comments from ECB Governing Council member Holzmann, who said he sees no reason for the ECB to cut interest rates again. Gains in the euro are limited after German June factory orders unexpectedly posted their biggest decline in 5 months. Also, the euro is struggling due to concerns that President Trump’s tariff policies will curb economic growth in the Eurozone.
