The dollar rebounded slightly ahead of key economic releases but stayed close to recent lows, leaving it vulnerable to further weakness. Concerns over Federal Reserve independence increased after President Trump's attempt to dismiss Fed Governor Lisa Cook amid fraud allegations, raising fears of political influence on monetary policy. Cook's removal could lead to more dovish appointments and hasten rate-cut expectations, with markets pricing a high probability of a September cut and another by year-end. Treasury yields were mixed and may stay under pressure while upcoming GDP, labour and PCE data will shape expectations for policy easing.
President Donald Trump's attempt to dismiss Fed Governor Lisa Cook over fraud allegations has intensified concerns about the central bank's independence. Markets view the episode as part of a broader effort by Trump to increase influence over monetary policy, which could undermine confidence in the dollar. Cook's removal could pave the way for more dovish appointments, accelerating the prospect of rate cuts.
The dollar rebounded slightly before key data releases this week but remained near its lows. However, the currency could remain exposed to the downside, with investors concerned about the Fed's independence and the prospect of further policy easing. Looking ahead, attention turns to tomorrow's GDP and labour data, and Friday's PCE price index, the Fed's preferred gauge of inflation. The data will help clarify whether expectations of policy easing are justified.
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