Powell Under Pressure as Political Interference Resurfaces
The Fed’s independence remains in focus ahead of next week’s meeting, with President Trump once again pushing for rate cuts. While he stepped back from threats to remove Chair Jerome Powell, the reemergence of political pressure has added uncertainty to the Fed’s outlook. Strategists flagged this as a key downside risk for the dollar, noting it could cap gains even if the data supports a more patient policy stance.
BNP Paribas noted that trade-related uncertainty has declined recently, particularly following tariff developments, but the market remains sensitive to Fed commentary and political headlines.
BOJ and ECB Offer Limited Support for Dollar Bulls
The dollar gained 0.4% versus the yen to 147.59, aided by softer-than-expected Tokyo inflation. However, political fallout from Japan’s upper house elections may complicate the BOJ’s policy outlook, reducing scope for policy tightening. The yen’s weakness was not enough to lift the DXY meaningfully, as the euro closed flat at $1.1741, notching a 1% weekly gain.
Euro support came from the ECB’s relatively upbeat tone and optimism around a potential EU-U.S. trade deal. With UK retail sales and employment data disappointing, the euro also strengthened against sterling, hitting 87.43 pence—its highest level since April. The pound slipped 0.6% to $1.3434 against the dollar.
