The euro held above $1.17, hovering near its strongest level since late July, after French Prime Minister François Bayrou was ousted in a confidence vote, a result that markets had widely anticipated. The defeat brought down his minority government and deepened France’s political crisis. President Emmanuel Macron must now appoint his third prime minister in just one year. Markets are also looking ahead to Thursday’s European Central Bank meeting, where policymakers are expected to leave rates unchanged for a second consecutive time, amid persistent trade uncertainty and steady eurozone inflation, which has remained on target for three straight months. Across the Atlantic, attention is fixed on this week’s US inflation report. Weaker labor market data last week strengthened the case for a Federal Reserve rate cut in September, with investors increasingly pricing in the possibility of a larger-than-usual move.

The Indonesian rupiah slipped to around 16,480 per dollar on Tuesday morning before recovering slightly after the central bank confirmed it was intervening in the market to stabilize the local currency. Pressure on Indonesian assets mounted following the sudden removal of Sri Mulyani Indrawati as finance minister Monday, a move that unsettled investors given her reputation for fiscal prudence and global credibility. Her exit came just days after the country was rocked by its largest anti-government protests in years, adding to political and economic uncertainty. Newly appointed finance minister Purbaya Yudhi Sadewa pledged to safeguard Indonesia’s fiscal health, but markets remain cautious. So far this year, the rupiah has fallen 2.3% against the US dollar, making it Asia’s second-worst performing currency after the Indian rupee. Meanwhile, the dollar index steadied at 97.4, near its weakest in almost seven weeks, as soft US labor data fueled bets of imminent Federal Reserve rate cuts.

The offshore yuan held its recent advance around 7.12 per dollar on Tuesday, after three straight sessions of gains, supported by weakness in the US dollar. The greenback continued to struggle as mounting concerns over a cooling labor market fueled expectations of Federal Reserve rate cuts. Traders are now pricing in an 89% chance of a 25 bps cut at next week’s meeting, with some even positioning for a larger 50 bps reduction. Domestically, the yuan came under pressure after recent data showed China’s trade performance weakened in August, with exports slowing to six-month low and softer-than-expected imports adding pressure on growth. Meanwhile, China is pressing ASEAN to finalize an upgraded free trade pact by year-end to boost exports and counter US tariffs, highlighting its push for greater market access and multilateral cooperation. Looking ahead, market attention turns to key data this week, including August consumer prices, which are expected to reignite deflationary concerns.