US Dollar (USD) slipped in reaction to Trump nominating Stephen Miran to temporarily serve as Fed Governor (seat vacated by Kugler). DXY was last at 98.24 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Increase in dovish expectations can weigh on USD

"This is still pending senate confirmation and is only intended to be temporary (until end-Jan) while the administration continues its search for a permanent replacement. While his tenure is temporary, he is known to be a dove, and that may still influence the votes at upcoming FOMCs. There are 3 more FOMC meetings in September, October and December this year."

"Understandably, several officials may already have tilted dovish. Labour market softness seen from 3 months of payrolls, and the employment subcomponent of both ISM manufacturing and services have shifted markets to price in a good chance of a cut in Sep. Depending on the outcome of US CPI next Tuesday, markets may even shift toward a 25 or 50bp cut for September."

"Recall last year, when the Fed first cut rate, they delivered a 50bp cut at the Sep-2024 FOMC. Increase in dovish expectations can weigh on USD. Bullish momentum on daily chart shows signs of fading while RSI fell. Remain bias to sell rallies but we prefer to wait for outcome of CPI report. Support here at 98 levels, 97.20. Resistance at 99.50 (100 DMA), 100.50 levels."