Dollar Sinks on FED Cut Bets.
The U.S. dollar struggled the past month, with the Dollar Index falling below 98, marking its largest monthly decline of the year. The slide reflected growing market expectations that the Federal Reserve will cut interest rates in September amid weak jobs data and broader signs of a cooling economy.
Fed Chair Jerome Powell reinforced these expectations through his cautious remarks but the dollar faced additional pressure from political developments in Washington. Powell clashed with President Donald Trump who intensified calls for substantial rate cuts to support economic growth. Trump criticised the Fed on social media claiming that its policies were harming the housing market and slowing the economy. However, Powell remained steadfast, emphasising the importance of data driven decisions and the Fed’s independence.
The situation escalated when Trump sought to remove Federal Reserve Governor Lisa Cook, citing alleged mortgage related misconduct. Cook rejected the claims as baseless and legally unsupportable, filing a lawsuit to contest her removal and drew attention to the risks of political interference in the Fed’s operations. These events reignited debate over the autonomy of the Federal Reserve and the potential consequences of political pressure on U.S. monetary policy. At the same time, the dollar’s weakness provided support for other major currencies, with the euro and Australian dollar gaining ground, and Latin American currencies, including the Brazilian Real and Mexican Peso, benefiting from attractive carry opportunities.
By contrast, some emerging markets came under pressure. The Indian Rupee hit a record low near 88 per dollar, weakened by new U.S. trade tariffs, while the Chinese Yuan faced pressure on concerns over China’s economic slowdown.
Gold Continues to Shine.
Gold logged a strong performance in August, lifted by a retreating U.S. dollar and heightened expectations of a Federal Reserve rate cut. Spot prices gained over 4% during the month, rising from around $3,291 to finish near $3,445 per ounce, marking one of bullion’s best monthly advances this year.
The dollar’s decline, alongside softer U.S. economic data, increased gold’s appeal as a hedge. Political tensions in Washington and uncertainty around global growth also drove safe haven demand, reinforcing gold’s role as a store of value amid financial volatility.
Investor flows into gold backed exchange traded funds picked up through the month and trading volumes remained elevated. Analysts noted that August confirmed gold’s resilience with the metal continuing to attract buyers whenever the dollar faltered or risk sentiment shifted.
With the Fed’s September decision looming, markets treated August as a reminder that bullion remains highly sensitive to U.S. monetary policy and the broader macroeconomic backdrop.
Tech Leads Wall Street Rally.
U.S. stock markets posted solid gains with major indices reaching new highs despite lingering economic and geopolitical concerns. The S&P 500 rose 1.9% to close at 6,460.26, marking its fourth consecutive monthly gain, while the Dow Jones Industrial Average advanced 3.2% and the Nasdaq Composite climbed 1.2%, driven largely by strong earnings in the technology sector.
Investor optimism was supported by encouraging economic data. The U.S. economy grew at an annualised rate of 0.8% in the second quarter, while consumer spending rose 1.6%, signalling resilience even amid global uncertainties and concerns over slowing growth in Europe and China. Employment data was mixed, with job creation slightly below expectations but unemployment remained steady, maintaining confidence in the broader recovery.
Technology stocks dominated the headlines, as companies such as Nvidia, Microsoft and Meta exceeded earnings forecasts, boosting investor sentiment. Apple also reported stronger than expected sales for its latest products, while Tesla and Amazon faced challenges from supply chain disruptions and regulatory scrutiny, producing a mixed performance within the sector. The so-called “Magnificent Seven” tech stocks continued to set the pace for broader market gains.
Financials and Industrials also contributed to the rally with banks benefiting from higher lending margins and industrial firms buoyed by infrastructure related contracts. However, analysts warned that valuations remain high with price to earnings ratios near historic highs, leaving markets vulnerable to shocks from inflationary pressures, rising interest rates or geopolitical tensions.