The US dollar index fell to a three-year low in early Thursday trading. The index, which measures the performance of the greenback against a basket of six major currencies, has now lost more than 10% since the start of the year — a reflection of the weakening of the world’s reserve currency relative to its peers. The latest drop followed Jerome Powell’s testimony before the US Congress, during which the Federal Reserve Chair pushed back against a July rate cut. However, he also acknowledged that the inflationary impact of the US administration’s tariffs may prove short-lived — a comment that fuelled market speculation of a rate cut later in the summer. At the same time, speculation is mounting over Donald Trump’s dissatisfaction with Powell and possible plans to replace him with someone whose views on monetary policy align more closely with the President’s own. Such a move would undermine the central bank’s credibility, raising doubts over its independence — a dynamic that could further weaken the dollar as markets price in both a loss of institutional credibility and expectations of a more “compliant” and dovish Fed.
Ricardo Evangelista, ActivTrades
Source: ActivTrader
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