Dollar Slips as Fed Signals Cuts, PCE in Focus

The dollar was set for a monthly decline on Friday as bets on imminent Federal Reserve rate cuts strengthened after Governor Christopher Waller said he “fully expects” more cuts to follow. Market concerns about Fed independence grew after Governor Lisa Cook filed a lawsuit against President Trump, who announced plans to fire her earlier in the week. European Central Bank accounts revealed policymakers were split on inflation risks, while upcoming French and German CPI data are expected to guide the ECB’s next move.

Equities

London’s FTSE 100 closed 0.4% lower on Thursday, marking a third straight session of losses. Utilities weighed heavily, with Drax Group down 7.5% after Britain’s financial watchdog launched a probe into its biomass sourcing disclosures.

Centrica and SSE also slipped, both falling 1.5% during the session. The technology index shed 1.4%, echoing global moves after Nvidia’s results, while precious metals stocks softened with Hochschild and Endeavour Mining both losing about 2%. GSK declined 1.2% despite regulatory approval for its new antibiotic pill Blujepa, intended to treat urinary tract infections in women.

PPHE Hotel led the declines, dropping 16.2% after posting weaker half-year earnings. IT services provider Softcat climbed 3.8% after lifting its annual profit forecast for the third time in six months. Gains in industrial miners helped limit broader losses, with Anglo American up 2.9% and Rio Tinto adding 1.5%.

On Wall Street, the S&P 500 rose 0.32% to close at a record 6,501.86 points, while the Dow gained 0.16% to 45,636.90, also hitting a record high. The Nasdaq advanced 0.53% to 21,705.16. Nvidia’s shares dipped 0.8% on Thursday after the company excluded potential China sales from its outlook, citing US–China trade uncertainties. Despite that, quarterly revenue rose 56%, reaffirming demand for AI infrastructure. Alphabet added 2%, Amazon gained 1% and Broadcom jumped almost 3% after the update.

Snowflake surged 20% after raising its fiscal 2026 revenue forecast, citing growth in demand for AI-driven data services. HP Inc closed 4.6% higher after reporting third-quarter revenue above expectations, boosted by stronger sales of AI-enabled PCs. Hormel Foods slid 13% after issuing a downbeat profit forecast. Nike edged 0.2% lower following confirmation that it would cut less than 1% of its corporate workforce as it continues to lose ground to rivals.

Forex & Commodities

The US dollar was weaker early on Friday, heading for a monthly decline as investors grew more confident that the Federal Reserve will begin cutting rates in September. The dollar index stood at 97.92, down for the month, with the euro at $1.166, sterling at $1.351 and the yen at 147.0 per dollar. The Australian dollar was steady at $0.6533 while China’s yuan strengthened to its firmest level in ten months. The pound’s gains in August reflect broad dollar softness as traders price in more than 100 basis points of US easing by mid-2026, with Fed Governor Christopher Waller stating on Thursday that he expects cuts to start next month.

Markets are also watching legal proceedings after President Trump sought to dismiss Fed Governor Lisa Cook, who has since filed a lawsuit challenging his authority. Concerns over central bank independence added to pressure on the dollar, though the immediate market impact remained modest. Investors are awaiting US inflation data later today, with the personal consumption expenditures (PCE) index expected to hold at 2.6% year-on-year. Next week’s labour market report will be key ahead of the September FOMC meeting.

Gold held firm after touching a one-month high on Thursday, trading at $3,408 per ounce this morning, supported by the weaker dollar and expectations of lower borrowing costs in the US. The metal has gained over the month as traders positioned for looser monetary policy.

Oil prices slipped in early Friday trading, with Brent crude at $68.23 a barrel and WTI at $64.21. Both benchmarks remain set for weekly gains after earlier support from supply concerns linked to Ukraine’s strikes on Russian export terminals. However, the approach of the US Labour Day holiday and the anticipated seasonal dip in fuel demand weighed on sentiment.