Euro Falls Against Dollar Amid Strong US Data, Upcoming Inflation Reports

The euro dropped against the dollar for the fourth consecutive day and traded near 1.1660 during the Asian session on Friday. Global observers note that traders are looking forward to the upcoming July Retail Sales of Germany and the initial release of the Consumer Price Index for August later in the day. The focus will then shift to the US, where the Personal Consumption Expenditures Price Index for July is expected to be published during North American trading hours.

It is believed that the euro declined against the US dollar as the greenback bounced back after positive economic reports. Global reports indicate the United States economy is experiencing solid expansion during the second quarter, with the annualised GDP increasing by 3.3%. Global analysts point out that this was faster compared to the initial projection of 3.1% and higher than the 3.0% level, which strengthened market confidence in the US Dollar and pressured the EUR/USD pair to the downside in Thursday's trading session.

Market commentators point out that the US dollar may come under pressure because the Federal Reserve policy outlook will be influenced by fresh dovish sentiment. On Thursday, Fed Governor Christopher Waller indicated that he prefers a reduction in the September session, with more cuts possibly occurring over the next three to six months. Some reports noted that he pointed out that the move is necessary to aid the weaker labour market and avert further risks to the economic stability.

Recently, US Vice President JD Vance stated in an interview with the USA Today that the Federal Reserve is no longer independent. In his opinion, monetary policy and interest rate decisions should not be left to unelected bureaucrats but elected officials such as the President. He remarked that bureaucrats shouldn’t solely decide on monetary policy or interest rates without guidance from elected officials. He stressed that those chosen by the public must have a say, adding that the President is far better positioned to make such important decisions on behalf of the American people.

According to the European Central Bank (ECB) deliberations during the July meeting, the members of the monetary union feel that there are more down risks in the next two years, primarily because of a decline in the growth prospects and the impact of the US tariffs. Some members, however, cautioned that the longer-term perspective might change in the opposite direction. They noted that energy prices and currency movements are uncertain, which may ultimately cause upside risks. In general, the discussion was cautious regarding weak short-term performance but included a sense of possible longer-term changes.

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Tokyo CPI Eases, USD/JPY Reacts As Traders Eye US PCE Inflation Report

The USD/JPY pair traded around 146.85 in early Asian trading on Friday as the Japanese Yen gained momentum versus the US Dollar following the announcement of the Tokyo August Consumer Price Index in Japan. Market observers point out that traders are now shifting their focus to the upcoming US July Personal Consumption Expenditures (PCE) Price Index report, which will be released later on Friday and may provide renewed impetus for the dollar and the yen in the near future.

The most recent data from the Japan Statistics Bureau on Friday showed that consumer prices increased 2.6% annually in Tokyo, versus 2.9% in July. The Capital Core Inflation also reduced to 2.5, compared with 2.9% in July. Investors noted that the recent data was in line with market expectations, indicating a slight decrease in price pressures.

The Tokyo Core Consumer Prices increase was noted by global analysts to have risen 2.5% annually in August 2025, which is slightly easing and in line with market expectations. In the meantime, the Tokyo Consumer Price Index (CPI), which excludes fresh food and energy and is a major measure followed closely by the Bank of Japan (BoJ), rose by 3.0% compared to one year ago. Global marketers point out that this was a slight decline from July’s 3.1% level, indicating a stabilizing trend in inflationary pressures, though remaining above the 2% Central Bank target.

Recent inflation rates in Tokyo have reinforced hopes that the Bank of Japan will once again move to increase interest rates, which would support the Yen. According to a survey of reports in August, nearly two-thirds of economists now expect the BoJ to raise its key rate by at least 25 basis points by year-end, compared with slightly more than half a month earlier.

Investors also expect the US Dollar to be influenced by upbeat second-quarter GDP results. Some analysts noted that the American economy expanded at an annualized rate of 3.3% in Q2, which was higher than initially projected. It is believed that this recovery was greatly boosted by the rise in business investment and a significant role played by trade implying that the economy is holding stronger than many people had speculated and gives the US Dollar a stronger outlook.

Some analysts indicate that traders will closely watch the US PCE inflation report on Friday since it will be the final key data point before the Federal Reserve meeting in September. Headline PCE is expected to increase by 2.6% year on year in July, while core PCE is expected to increase by 2.9% year on year in July.

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NZD Steady on Dovish Fed Hopes and RBNZ Rate Cut

In the Asian session of Friday, the NZD/USD pair benefited from improved risk sentiment and traded around 0.5900. Traders appear to be gaining more confidence that the US Federal Reserve will reduce the interest rates at its September meeting, a prospect that has increased demand for the Kiwi. The market anticipates that the Fed will cut the rate by 25 basis points, pushing the target range to 4.00%-4.25%. The CME FedWatch tool estimates the probability of such a move at 85%. Some reports suggest this reflects a dovish stance in US monetary policy, contributing to the resilience of risk-sensitive currencies such as the New Zealand Dollar against the US Dollar.

Federal Reserve Governor Christopher Waller said he would support a rate reduction at the upcoming policy meeting on Thursday. He also indicated that further cuts could be expected within the next three to six months. Waller currently holds a dovish position, noting that the labour market is weakening, something he cautioned could deteriorate rapidly if conditions continue to worsen. His remarks are seen as a sign of growing concern at the Fed that softer employment trends may require a more accommodative monetary policy response in the near term.

Investors are focused on the imminent release of the US Personal Consumption Expenditure (PCE) Price Index for July, scheduled at 12:30 GMT, as it provides fresh signals on interest rates. Core PCE inflation, the Fed’s preferred measure, is projected to rise to 2.9% year-on-year in June from 2.8% in May, while maintaining steady monthly growth of 0.3. Ahead of the data, global marketers note that the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, is trading cautiously around 98.00, reflecting market uncertainty.

On Thursday, the Australia and New Zealand Bank (ANZ) reported that business confidence in New Zealand improved in August to 49.7, compared with 47.8 in July. This improvement is believed to have been partly driven by lower inflation expectations and last week’s interest rate cut by the Reserve Bank of New Zealand. The RBNZ reduced its Official Cash Rate by 25 basis points to 3%, as expected, and signalled a more accommodative monetary policy outlook—a decision that gives businesses some relief.

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USD/CHF Edges Up as Markets Await Crucial US Inflation Data

The USD/CHF pair traded near 0.8025 during the European session on Friday. The Swiss Franc is believed to be slightly weaker, with the US Dollar making small gains ahead of important US inflation statistics. Traders are waiting for the July Personal Consumption Expenditure (PCE) Price Index, which is expected to be released at 12:30 GMT and will once again provide new indications about the monetary policy outlook and the future rate direction of the Federal Reserve.

Some analysts point out that even at the time of press, the Greenback has fluctuated around 98.00 on the US Dollar Index (DXY), which gauges the performance of the Greenback against six major currencies. Market players are now focused on the upcoming core PCE inflation report, one of the key measures that excludes food and energy. The Federal Open Market Committee (FOMC) closely monitors this data because it has a significant influence on future interest rate decisions.

It is estimated that core PCE inflation will increase to 2.9% on an annual basis compared to 2.8% in June. Underlying inflation is projected to have risen by 0.3% on a monthly basis. These figures are considered critical in determining market expectations concerning the Federal Reserve’s monetary policy outlook, as investors assess whether an increase in inflation could affect the timing or magnitude of future interest rate decisions.

According to the CME FedWatch tool, markets are already pricing in an 85% probability that the US Federal Reserve will reduce interest rates by 25 basis points at its September meeting, cutting its target range to 4.00%-4.25%. Meanwhile, the economy of Switzerland showed signs of cooling during the second quarter. Official data released on Thursday confirmed GDP growth of only 0.1%, in line with expectations but significantly lower than the previous 0.4% growth. Investors expect that such a slowdown might persuade the Swiss National Bank to continue maintaining a very loose monetary policy.

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