Dollar Stays Soft, Bessent’s Half-Point Cut Idea Stirs Talk but Not Positioning – Action Forex

Dollar continued to stay soft in Asian session today, carried over from Tuesday’s post US CPI weakness. US Treasury Secretary Scott Bessent added to the policy discussion by urging Fed to consider a 50bps rate cut in September to “make up for the delay” in starting its easing cycle earlier this year.

Bessent argued that if Fed had started cutting in June or July, the current debate would look different, and that now it may be necessary to move more aggressively. He also voiced support for the Senate confirming Stephen Miran — currently chair of the Council of Economic Advisers — to fill a temporary Fed board vacancy before September, suggesting Miran’s presence could help pave the way for a larger cut given recent downward revisions to jobs data and favorable inflation readings.

Despite the strong rhetoric, fed funds futures show markets are far from embracing Bessent’s proposal. Pricing currently reflects a 94% chance of a 25bps cut in September, with the remaining probability on no change. The idea of a 50bps cut has yet to gain any traction among traders. Odds of an October cut are at 60%, but the prevailing expectation is still for just two cuts in total for 2025.

In the broader FX markets, Yen continues to underperform as the worst performer as strong risk-on sentiment continues to weigh. In particular, Japan’s Nikkei index surged above 43k mark for the first time ever, extending its record-breaking rally. Meanwhile, in the US, both S&P 500 and NASDAQ closed at all-time highs overnight, reinforcing the positive tone in global equities.

Elsewhere, Loonie and Dollar are also under pressure. Sterling leads gains, trailed by Euro and Swiss Franc. Despite the buoyant risk mood, Aussie and Kiwi are trading mixed in the middle of the pack.

On the trade front, US President Donald Trump eased market nerves in precious metals earlier in the week by announcing he would not impose tariffs on gold. The move was welcomed by the Swiss precious metals association ASFCMP as a positive signal for trade stability. However, the group stressed the need for a formal and binding commitment.

Meanwhile, China announced preliminary anti-dumping duties of 75.8% on Canadian canola imports, escalating a trade dispute dating back to Ottawa’s tariffs on Chinese EVs last August. Canada has rejected the dumping claim and expressed “deep disappointment” over the decision but said it remains open to constructive dialogue to resolve the dispute.

In Asia, at the time of writing, Nikkei is up 1.35%. Hong Kong HSI is up 2.04%. China Shanghai SSE is up 0.48%. Singapore Strait Times is up 0.84%. Japan 10-year JGB yield is up 0.024 at 1.524. Overnight, DOW rose 1.10%. S&P 500 rose 1.13%. NASDAQ rose 1.39%. 10-year yield rose 0.020 to 4.293.

Ethereum outperforms, Bitcoin pauses for breath

Ethereum’s rally has gathered strong pace and the cryptocurrency is now on track towards its record high. The move comes as Bitcoin remains stuck in consolidation, unable for now to decisively break its own record, as traders await the next catalyst.

Both assets are drawing support from the improved clarity around US cryptocurrency policy. However, Ethereum’s outperformance appears tied to larger institutional inflows, with big investors playing catch-up. In particular, Ethereum’s dominant role in stablecoin infrastructure leaves it uniquely positioned to benefit as digital dollar transactions expand under a more certain regulatory regime.

Technically, Ethereum’s near-term outlook stays bullish while above 4,163.97 support. Firm break of 4,863.75 record high would open the way toward 100% projection of 2,110.58 to 3,940.08 from 3,353.16 at 5,128.66.

On the broader horizon, a clean break above 4,163.97 also sets up a medium term move move toward 138.2% projection of 878.5 to 4,092.55 from 1,382.55 at 5,824.36.

Bitcoin, meanwhile, is likely to see more consolidation below 123,231 in the near term. The broader outlook remains bullish while above 111,889 support, with the long-term uptrend expected to resume sooner or later.

However, Bitcoin may face strong resistance just below 100% projection of 49,008 to 109,571 from 74,373 at 134,936, which could act as a cap before any sustained move higher.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.1578; (P) 1.1628; (R1) 1.1665; More…

EUR/USD rebounded after drawing support from 55 4H EMA, but stays below 1.1698 temporary top. Intraday bias remains neutral first. Outlook is unchanged that correction from 1.1829 should have completed with three waves down to 1.1390. Above 1.1698 will bring retest of 1.1829. However, break of 1.1589 support will dampen this bullish view and bring deeper fall back to 1.1390 instead.

In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will remain the favored case as long as 1.1604 support holds.