What a Fed Rate Cut Means for the Dollar Forecast
- Aug 29, 2025
- 2 min read
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The U.S. dollar is stumbling, poised for a notable drop against major currencies for the month of August. Like a heavyweight boxer taking a hit, its value is being challenged by a flurry of factors, but none as powerful as the growing certainty that the Federal Reserve is about to change its course on interest rates.
When a central bank lowers its interest rates, it generally makes its currency a less attractive option for investors. As other currencies begin to look more appealing, money flows out of the U.S. dollar, driving its value down. This month, that process has pushed the dollar index, which measures its value against a basket of currencies, down by a significant two percent.
Adding to the dollarâs instability is a highly unusual subplot: political pressure on the Fedâs independence. President Donald Trump has been on a public campaign to influence the central bank's decisions, even going so far as to get into a legal battle with one of its governors. The big question is, what does this unprecedented political noise mean for the dollarâs credibility and its long-term forecast on the global stage?
