Dollar Weakness Deepens as Traders Await US Inflation Data – GBP/USD and EUR/USD Stay Strong

The US Dollar is struggling to hold its ground this week as expectations of Federal Reserve rate cuts intensify. Friday’s weak Nonfarm Payrolls report and a record downward revision in past job data have left the Greenback vulnerable. Now, all eyes turn to upcoming US inflation figures — the Producer Price Index (PPI) today and Consumer Price Index (CPI) tomorrow — which could set the tone for the Fed’s next move.

Jobs Data Reinforces Fed Cut Expectations

The Bureau of Labor Statistics recently revised its annual payroll figures lower by 911,000 jobs, signaling a much weaker labor market than previously estimated. With the unemployment rate rising to 4.3%, markets are convinced that the Fed will act at its September meeting. Fed funds futures show a 93% probability of a 25 basis-point cut and even some chance of a larger 50 bps reduction.

This backdrop has pushed gold to record highs and weakened the US Dollar Index (DXY), which now trades below the key 98.00 level.

Inflation in the Spotlight

The next big test for the dollar is US inflation data. Both headline and core PPI for August are expected to rise 0.3% month-on-month, while CPI due tomorrow is also forecast at 0.3% m/m, lifting the annual CPI rate to 2.9%.

A soft reading would reinforce rate-cut expectations and keep pressure on the USD.
A hotter print could offer temporary relief for the Greenback but is unlikely to reverse its broader downtrend given weak labor conditions.

GBP/USD Outlook – Can Sterling Break Higher?

Sterling continues to benefit from a weaker US Dollar and resilient UK economic data. The GBP/USD pair is consolidating just below resistance at 1.3540–1.3588. A break above this zone could open the door to a rally toward the July peak of 1.3788.

Immediate support: 1.3500
Secondary support: 1.3435–1.3460

UK GDP and industrial production data due Friday could provide fresh direction, but for now, the bullish technical bias remains intact.

EUR/USD Outlook – Bullish Trend Intact

The EUR/USD pair is also holding firm, supported by dollar weakness and a break above its short-term downtrend. The focus now is on whether it can extend gains toward the July high of 1.1830.

Key support: 1.1700, followed by 1.1560–1.1620
Resistance: 1.1830, then psychological 1.2000

The pair remains above its rising trend line, keeping the overall bias tilted to the upside.

Trading Outlook

The dollar’s near-term direction hinges on this week’s inflation numbers. If PPI and CPI confirm cooling price pressures, the Greenback may extend its decline, allowing GBP/USD and EUR/USD to rally further. Any dollar rebound from hotter inflation is likely to be short-lived as traders focus on labor market weakness and the Fed’s policy pivot.

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Yasher Rizwan