The U.S. dollar strengthened against major currencies on Wednesday as investors focused on U.S. economic data due next week, despite lingering concerns about the Federal Reserve's independence following President Donald Trump's attempt to fire Fed Governor Lisa Cook. The euro fell 0.4% to $1.1595, its lowest since Aug. 6, while sterling fell 0.3% to $1.3442. The Swiss franc and Japanese yen also fell about 0.4% against the greenback.
Analysts said the dollar's resilience reflected markets waiting for confirmation from August non-farm payrolls data and inflation reports that the Fed will indeed continue its rate-cutting plan in September. Bond market data showed the two-year U.S. Treasury yield fell to 3.645%, its lowest since May 1, while the 30-year bond yield rose 5 basis points to 4.956%. According to CME FedWatch, the market now places an 88% probability on a 25-basis-point cut next month.
In Europe, attention turned to French politics as Prime Minister Francois Bayrou struggled to save his minority government ahead of a confidence vote on September 8 on budget cuts. Opinion polls show a majority of French people want parliamentary and presidential elections. French government bonds steadied after the benchmark 10-year bond yield jumped to a five-month high on Tuesday.
Meanwhile in the UK, preliminary data showed producer price inflation rose to a two-year high of 1.9% in June, up from 1.3% in May. The report added to signs of inflationary pressures in the British economy. Currency analysts at Societe Generale said that while the euro remained under pressure, market focus was expected to return to US economic data next week, with investors favoring the yen, Australian dollar and Swiss franc.
