President Donald Trump publicly called on the Federal Reserve to ease monetary policy, stating that a strong economy should have low interest rates. He threatened to close trade with countries with which the U.S. has deficits if the central bank does not cut rates. This undermines confidence in the Fed's independence and reduces the dollar's appeal. As analysts note, "the White House is detached from reality."

Third factor: tightening by other central banks

Even if the Fed raises rates in September, the divergence in monetary policy between the U.S. and other countries will not be as significant as before. The European Central Bank is expected to raise its rate to 2.75% on Thursday, and markets are pricing in a 75% probability of another increase to 3.0% by December. The Bank of Japan is also preparing to raise rates on September 18. As Elias Haddad, head of global market strategy at BBH, noted, "even if a Fed hike in September is a done deal, we doubt the dollar will revisit cyclical highs. Tightening by other central banks limits policy divergence."

What's next: CPI will decide everything

The coming days will be crucial for the dollar. On Friday, September 11, U.S. inflation data (Consumer Price Index, CPI) will be released. The consensus forecast assumes inflation will remain at July's level of 3.4%, while the core figure is expected to slow to 2.4%.

According to analysts, these data will be decisive for the Fed's decision. A "hot" CPI report will virtually lock in a rate hike in September and strengthen the dollar. A "cold" report will bolster arguments for holding rates steady and make the dollar vulnerable to a reassessment toward a dovish policy.