LONDON : The dollar slid to a more than two-month low against sterling and the euro and a 10-month trough versus the Australian dollar on Tuesday as investors firmed bets for a Federal Reserve interest rate cut this week.

The U.S. dollar index, which tracks the currency against a basket of six major rivals, fell to 97.044, after hitting its lowest since July 7 with U.S. President Donald Trump renewing calls for aggressive monetary easing.

Markets expect a 25-basis-point rate cut on Wednesday, with rapidly softening labour market data being the key driver of the ramp-up in easing bets in recent weeks.

In a social media post on Monday, Trump called on Fed Chair Jerome Powell to enact a "bigger" cut, pointing to the housing market.

"Focus remains on the Fed meeting on Wednesday," said Mohit Kumar, strategist at Jefferies. "Key would be Powell's tone."

"If Powell puts more emphasis on inflation risks or the uncertainty surrounding the growth and inflation outlook, we could see the market paring back some of the rate cut expectations," he added.

Elsewhere, sterling rose 0.28 per cent to $1.3636, hitting its highest since July 8.

Data showed on Tuesday that Britain's jobs market has lost a little more steam, potentially easing worries at the Bank of England about persistent inflation pressures.

The Office for National Statistics figures showed the number of workers on companies' payrolls falling for a seventh month in a row, while basic wage growth in the private sector - watched closely by the BoE - slowed to 4.7 per cent between May and July from 4.8 per cent in the three months to June.

The BoE is expected to keep interest rates on hold this week, having cut in August.

"Until inflation convincingly cools, the BoE is stuck holding rates high, keeping pressure on growth," said Lale Akoner, global market analyst at eToro.

The euro rose as much as 0.4 per cent against the weakening dollar to $1.1809, a level not seen since July 1.

Data showed on Tuesday that euro zone industrial production inched higher in July, confirming views that the sector is holding up despite trade tensions, even if its rate of expansion is anaemic.

German investor morale unexpectedly rose in September, the ZEW research institute said on Tuesday, in a sign of cautious optimism.

The Australian dollar edged 0.06 per cent lower to $0.6674, after climbing to $0.6677, its strongest level since November 8.

Versus the Swiss franc, the dollar fell 0.5 per cent to 0.7905

Against the yen, the dollar slipped 0.3 per cent to 146.950, to its lowest since July 3 ahead of the Bank of Japan policy meeting on Friday, with money markets expecting the central bank to keep rates at 0.5 per cent.

Japan's farm minister and the chief government spokesperson joined the race on Tuesday to lead the ruling party and replace outgoing Prime Minister Shigeru Ishiba, who announced his resignation last month.

Dollar falls to multi-month lows ahead of Fed rate decision