The U.S. dollar rebounded on Thursday following the previous day’s slump, buoyed by remarks from President Donald Trump that eased concerns over a potential early dismissal of Federal Reserve Chair Jerome Powell.
By 04:40 ET (08:40 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, gained 0.3% to reach 98.405. This followed a break in its six-day winning streak, which had ended amid sharp losses in the prior session.
Powell’s Future Fuels Dollar Volatility
Wednesday saw a brief but sharp drop in the dollar after market speculation surged that Trump might remove Powell from his Fed role. However, the president later clarified he had no immediate plans to fire the Fed chief.
Trump remarked it was “highly unlikely” that Powell would be removed over allegations of fraud, responding to Republican concerns about the Fed’s $2.5 billion renovation costs for its Washington headquarters—an issue the Fed has defended vigorously.
Powell has frequently been targeted by Trump’s criticism related to trade policies, especially for not cutting interest rates more aggressively. A Trump-led removal of Powell would be unprecedented, as no sitting president has ever formally dismissed a Fed Chair.
“In that hour, we saw the reaction we would have expected: a steepening in the U.S. yield curve, and the dollar sharply lower,” ING analysts noted in their report.
“However, it never looked like markets fully priced in Powell’s exit yesterday afternoon. Pricing for a September Fed cut didn’t go beyond 20bp, and EUR/USD failed to get beyond 1.1720 even before Trump’s denial caused an unwinding of all market moves.”
Adding to the calmer tone, June producer prices showed no significant month-on-month change, helping to ease earlier concerns stirred by an accelerating consumer price report released earlier in the week.
Sterling Dips Amid Weak UK Jobs Data
In Europe, EUR/USD dropped 0.4% to 1.1699 ahead of the final eurozone consumer price index data for June, expected to confirm last month’s 2.0% annual inflation rate, up from 1.9%.
The European Central Bank hinted after its June meeting that interest rates would likely remain steady at its upcoming session. However, President Trump’s threat to impose a 30% tariff on EU imports complicates the economic outlook.
GBP/USD declined 0.3% to 1.3390 following UK data that revealed a sharper-than-expected rise in unemployment for May, alongside a slight slowdown in wage growth—factors that could encourage the Bank of England to cut rates again next month.
The unemployment rate climbed to 4.7% for the three months through May, the highest since June 2021, while wage growth excluding bonuses eased to 5.0% year-on-year, down from 5.3%.
Australian Dollar Weakens
Elsewhere, USD/JPY gained 0.5% to 148.64 as election polls suggested Prime Minister Shigeru Ishiba’s coalition may lose its majority in the upper house.
Meanwhile, AUD/USD dropped 1% to 0.6472, hitting a three-week low after job data for June showed much weaker-than-expected employment growth in Australia and a surprising uptick in unemployment, signaling slower hiring momentum.
The USD/CNY rate was mostly flat at 7.1798.
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