The U.S. dollar regained ground on Thursday after a steep drop the previous day, helped by comments from President Donald Trump that downplayed the possibility of Federal Reserve Chair Jerome Powell being ousted prematurely.
As of 04:40 ET (08:40 GMT), the U.S. Dollar Index — which tracks the currency against six major peers — climbed 0.3% to 98.405. This marked a partial recovery after the index had snapped a six-session winning streak in the prior trading day due to heightened market volatility.
Trump Comments Steady Markets Amid Powell Speculation
The dollar experienced sharp losses on Wednesday as speculation spread that President Trump might remove Powell from his post. But Trump later reassured markets by stating that there were no immediate intentions to fire him.
Trump said it was “highly unlikely” that Powell would be dismissed over fraud concerns, addressing criticism from some Republican lawmakers regarding the Fed’s $2.5 billion renovation project at its Washington headquarters — a plan strongly defended by the central bank.
The Fed Chair has long been a target of Trump’s frustration, especially over his cautious approach to rate cuts amid ongoing trade tensions. Removing a Fed chief would break with historical norms, as no president has officially ousted one mid-term.
“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 observed in a note.
“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 stabilization, U.S. producer price data for June showed flat month-over-month growth, providing some relief after earlier CPI figures raised concerns about rising inflation.
Euro and Pound Slip on Data, Tariff Fears
Across the Atlantic, the euro lost momentum ahead of key inflation data. The EUR/USD pair slipped 0.4% to 1.1699, as markets waited for confirmation that eurozone consumer prices rose 2.0% year-over-year in June, up slightly from May’s 1.9%.
While the European Central Bank signaled last month that interest rates would likely stay unchanged at its next policy meeting, Trump’s proposed 30% tariff on imports from the EU has clouded the region’s economic outlook.
The British pound also came under pressure. GBP/USD dropped 0.3% to 1.3390 after the UK reported a larger-than-expected increase in unemployment for May, along with slower wage growth — trends that could influence the Bank of England to consider another rate cut in the coming month.
The unemployment rate for the three-month period through May climbed to 4.7%, the highest since June 2021, while pay excluding bonuses grew 5.0% annually, down from 5.3%.
Aussie Slides, Yen Softens
In Asia, USD/JPY rose 0.5% to 148.64 amid political uncertainty in Japan, as polls suggested Prime Minister Shigeru Ishiba’s ruling coalition could lose its upper house majority.
Meanwhile, the Australian dollar weakened sharply, with AUD/USD falling 1% to 0.6472 — its lowest level in three weeks. The slide followed disappointing labor market figures, which showed slower-than-expected job gains in June and a surprising rise in the unemployment rate.
The Chinese yuan was little changed, with USD/CNY holding steady at 7.1798.
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