The U.S. dollar drifted lower Thursday on growing expectations of further interest rate cuts by the Federal Reserve this year, while signs of French political accord helped the euro.

At 04:45 ET (08:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 98.342, headed for a weekly decline of 0.3%.

More Fed cuts ahead?
Market participants are becoming increasingly convinced that the U.S. central bank will follow last month's interest rate cut with more monetary easing as data points to growth slowing in the world's largest economy.

Fed Chair Jerome Powell warned earlier this week that the U.S. labor market is showing further signs of distress, stating that "the downside risks to employment have risen."

Additionally, the Fed's Beige Book an anecdotal survey on the state of the U.S. economy pointed to a slight loss of momentum in activity over the past eight weeks.

"Last night's release of the Fed's Beige Book suggests the Fed will have enough evidence to cut rates at the end of the month even if official data releases remain suspended because of the government shutdown," said analysts at ING, in a note.

Markets are currently priced for a quarter-point cut at the October 28-29 Fed gathering and another at the following meeting in December, followed by three more cuts next year, according to LSEG data.

The central bank last month cut borrowing costs for the first time since December, reducing the federal funds target range to 4%-4.25%.

Traders are also focusing on the trade spat between the world's biggest economies, with Presidents Trump and Xi set to meet on the sidelines of the APEC summit in Korea at the end of October, before the Nov. 10 deadline for the 90-day truce on tariffs.

"The question for financial markets is whether China's proposed export controls on rare earths are merely part of a bargaining ploy to achieve greater concessions from the U.S. Or really whether it is a threat which would stick and greatly disrupt global supply chains, given rare earths' role in products like semiconductors," ING added.

Source: Investing.com