By Krisada Yoonaisil, Financial Markets Strategist at Exness
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.
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. Futures markets now assign a high probability to a September rate cut, with an additional move by year-end.
Treasury yields were mixed and could remain under pressure as the market awaits interest rate cuts. Yields could react to new data releases if interest rate expectations change. Meanwhile, concerns about central bank independence could limit the downside potential for rates.
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. Softer figures could reinforce dovish bets, pressuring both the dollar and yields.