The U.S. dollar fell on Tuesday to its lowest level in more than two months against the British pound and the euro, and to a ten-month low against the Australian dollar, as investors increased bets on an expected Federal Reserve rate cut this week.

The dollar index which measures the performance of the greenback against a basket of six major currencies dropped to 97.121 after touching its weakest level since July 7, coinciding with renewed calls from U.S. President Donald Trump for bolder monetary easing.

Markets expect the Fed to cut rates by 25 basis points on Wednesday, after a run of weak U.S. labor market data in recent weeks strengthened bets on further easing.

In a social media post on Monday, Trump urged Fed Chair Jerome Powell to implement a larger cut, citing conditions in the housing market.

Mohit Kumar, strategist at Jefferies, said: The focus is on Wednesdays Fed meeting the key will be Powells tone. He added: If Powell emphasizes inflation risks or uncertainty around growth and inflation expectations, we may see markets trim some of their rate-cut expectations.

In currency markets, sterling rose 0.2% to $1.3627, its highest level since July 8, after data showed the UK labor market losing some momentum, which could ease the Bank of Englands concerns over persistent inflation pressures.

Data from the Office for National Statistics showed the number of employees on company payrolls fell for a seventh consecutive month, while private-sector wage growth closely watched by the BoE slowed to 4.7% between May and July, compared with 4.8% in the three months to June. The BoE is expected to leave rates unchanged this week after cutting them in August.

Laith Al-Khunor, global markets analyst at eToro, said: Until inflation convincingly declines, the Bank of England will remain stuck at elevated interest-rate levels, which keeps pressure on growth.

The euro gained as much as 0.3% against the dollar to reach $1.1797, its highest level since July 3. Investors are awaiting German ZEW survey data, eurozone wage figures, and industrial production numbers later in the day.

The Australian dollar edged slightly lower by 0.06% to $0.6666, after rising earlier to $0.6677, its strongest level since November 8.

Meanwhile, the dollar weakened 0.3% against the Japanese yen to 146.920 ahead of Fridays Bank of Japan meeting, where markets widely expect rates to be kept unchanged at 0.5%.

On the political front, Japans agriculture minister and the governments chief spokesperson announced their bids to lead the ruling party, succeeding outgoing Prime Minister Shingoro Ishiba, who stepped down last month.