Trump's Fed Pick Looms as Dollar Treads Water, Services Data Disappoints

As of August 6th, 2025, the dollar remains range-bound as investors choose to stay on the sidelines ahead of President Trump's decision on a nominee to fill an upcoming vacancy on the Federal Reserve's Board of Governors. Trump had previously stated he would make the announcement by the end of this week, and had narrowed the possible replacements for Fed Chair Jerome Powell to a short list of four.

Compounding the uncertainty, data released on the same day showed the U.S. services sector activity unexpectedly flatlined in July, even as input costs climbed by the most in nearly three years. Analysts say this underscores the hit to the economy from Trump's trade tariffs, which have also begun to impact corporate earnings.

Despite these developments, the dollar has yet to recover from its steep losses on Friday, when it experienced its largest one-day percentage fall in nearly four months following a concerning jobs report. Traders continue to price in a high likelihood of a Fed interest rate cut in September, with about 58 basis points worth of easing expected by the end of the year. However, the latest data presents a challenge for policymakers as they weigh rising price pressures from the tariffs against signs of a weakening U.S. economy.