The US dollar continued its decline against major currencies on Thursday, as growing expectations of interest rate cuts by the Federal Reserve combined with rising concerns over partisan divisions creeping into key American institutions.

Initial jobless claims in the US are under scrutiny after last weeks disappointing employment data, which contributed to the dollars weakness. In contrast, the euro found support ahead of expected peace talks next week to end the war between Russia and Ukraine.

Last week, President Donald Trump dismissed the official responsible for labor market data he found unsatisfactory. Market attention is now focused on his nominee to fill an upcoming vacancy on the Feds Board of Governors, as well as the list of potential candidates to succeed the current Fed chair.

Tony Sycamore, market analyst at IG, commented: All of this points to mounting political risk surrounding the US dollar, in addition to the recent string of weak economic indicators.

He added: Any breakthrough in ending the war in Ukraine would be a positive catalyst for the euro.

The dollar index which measures the greenbacks performance against a basket of major currencies rose 0.1% to 98.259 in early Asian trading, after falling 0.6% in the previous session.

The dollar held steady at 147.36 yen, while the euro traded at $1.1654, down about 0.1% after gaining 0.7% in the prior session.

US Labor Department data is expected to show initial jobless claims rising by 3,000 to reach 221,000 for the week ending August 2. Continuing claims for the week ending July 26 are also projected to see a slight increase.

Last Fridays report revealed weaker-than-expected US job growth in July, alongside significant downward revisions to May and June figures, indicating a sharp deterioration in labor market conditions.

Traders in interest rate futures are now pricing in a 94% chance of a 25-basis-point cut at the Feds September meeting, up from 48% a week ago, according to CME Groups FedWatch tool. Overall, markets are expecting around 60.5 basis points in rate cuts for the year.

A White House official said Wednesday that Trump could meet with Russian President Vladimir Putin as early as next week, as Washington continues to pressure Moscow to end the war in Ukraine.

Trump also stated Tuesday that he would announce his pick to replace outgoing Fed board member Adriana Kugler by the end of the week. He has also narrowed the list of candidates to succeed Jerome Powell as Fed Chair to four names.

The British pound held steady at $1.33505, while the Australian dollar was little changed at $0.65.