The dollar weakened against the euro and Swiss franc on Friday, on course for a 2% decline in August against a basket of currencies, as traders prepared for a U.S. interest rate cut by the Federal Reserve next month.

The dollar, which initially firmed after U.S. inflation data came in as expected, later gave up gains, failing to break a three-day losing streak.

The U.S. Commerce Department reported on Friday that its Personal Consumption Expenditures (PCE) Price Index rose 0.2% last month after an unrevised 0.3% rise in June.

The data keeps the Fed on track for a widely expected rate cut at its upcoming meeting on September 16-17. Money markets are pricing in an 87% chance of an easing, up from 63% a month earlier, CME’s FedWatch tool showed.

Tracking the Dollar Index

The dollar index, which measures the greenback against a basket of currencies, was down 0.09% at 97.803 in afternoon trading.

“FX markets remain range bound as investors await the next U.S. labor market report on September 5th,” said Dan Tobon, head of G10 FX strategy at Citi.

Weak consumer sentiment continues to hang over an anxious market, which is rebalancing and hedging portfolios at month’s end after U.S. equities rallied throughout August, said Uto Shinohara, senior investment strategist at Mesirow Currency Management.

Moreover, U.S. President Donald Trump’s campaign to exert more influence over monetary policy, including this week’s attempt to fire Fed Governor Lisa Cook, has weighed on the dollar.

A federal judge said on Friday she would set an expedited briefing schedule in Cook’s bid to temporarily block Trump from firing her while she pursues a lawsuit that says he has no valid reason to remove her.

“Market instability remains in focus, further fueled by media coverage surrounding Fed Governor Cook’s hearing regarding her contested dismissal,” Shinohara said.

Trump is trying to reshape the Fed after repeatedly criticizing the central bank and its chair, Jerome Powell, for not cutting interest rates.

Fed Governor Christopher Waller, who is said to be under consideration by Trump to succeed Powell as the Fed chair, said on Thursday he wanted to start cutting rates next month and “fully expects” more rate cuts to follow to bring the central bank’s policy rate closer to a neutral setting.

“Interestingly, the FX reaction function to policy announcements and developments with the Fed seems fairly muted – this could be a function of illiquid summer markets,” said Citi’s Tobon. “Or it could be a function of markets expecting any changes at the Fed will lead to a cutting cycle similar to what is already priced. That reinforces our view it will be all about the data.”

EU Inflation

Euro zone consumers kept their inflation expectations mostly stable at or above the European Central Bank’s 2% target in July, according to an ECB poll released on Friday.

Data released on Friday also showed French consumer prices rose slightly less than anticipated in August while Spain’s European Union-harmonized 12-month inflation rate was steady at 2.7%.

The euro was up 0.11% at $1.1696 and sterling was flat at $1.3502. Both were more than 2% higher for the month. Against the yen, the dollar edged up 0.02% to 146.985 yen, while for the month it was 2.5% lower.

Against the Swiss franc <CHF=EBS>, the dollar weakened 0.26% to 0.7997 and was 1.3% lower on the month.

Among other currencies, the New Zealand dollar was slightly stronger after Reserve Bank of New Zealand Chairman Neil Quigley tendered his resignation, citing the fallout over the handling of the sudden resignation of the central bank’s governor earlier this year.

China’s yuan hit its strongest level in 10 months against the dollar as steady central bank fixings and a hot domestic stock market drive the currency higher, while the Indian rupee dropped to a record low, weighed down by worries about the economic impact of steep U.S. tariffs on Indian imports.

(Reporting by Jaspreet Kalra and Laura Matthews; Editing by Alison Williams, Richard Chang and Leslie Adler)