The U.S. dollar declined on Friday, on course for a weekly drop as investors remain cautious about the fallout from U.S. trade tariffs and President Donald Trump’s recent moves to shape Federal Reserve policy.
At 04:20 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six currencies, fell 0.3% to 97.957, poised for roughly a 1% decline over the week.
Miran nominated to Fed Board
Trump’s trade tariffs kicked in Thursday, imposing levies ranging from 10% to 50% on exports from several regional economies. While many of these tariffs had been signaled in advance, the dollar’s slide reflects growing concerns over the potential damage to the U.S. economy.
Economic indicators have added to the uncertainty, with last week’s disappointing jobs report, weak service sector activity this week, and a rise in initial jobless claims. Traders now assign over a 90% chance of a Federal Reserve rate cut in September, a sharp rise from about an even chance a week ago.
Pressure on the dollar also stems from questions about the Fed’s autonomy. Trump announced Thursday that he will nominate Stephen Miran, chair of the Council of Economic Advisers, to fill the vacant Fed Board seat for the remainder of the term after Fed Governor Adriana Kugler resigned unexpectedly last week.
“Miran has echoed Trump’s dovish calls and Fed criticism of late, as well as downplaying the inflationary impact of tariffs,” ING analysts said. “He’s widely expected to join Christopher Waller and Michelle Bowman in the dovish camp for the few meetings he will attend, with a non-negligible risk he might try to build consensus for a 50bp move.”
This interim appointment likely bolsters Trump’s influence over the Fed, as the administration seeks a successor to Chair Jerome Powell, whose term ends May 15, 2026. Bloomberg News reported that Fed Governor Christopher Waller is emerging as a leading candidate to take over as chair.
Euro nudges down amid Ukraine peace hopes
The euro slipped slightly to 1.1662 against the dollar, just under a one-week high, as investors reacted to ongoing peace talks aimed at ending the war in Ukraine.
Russian President Vladimir Putin is set to meet with President Trump in the coming days, following discussions between Trump’s envoy Steve Witkoff and Putin.
“Markets now need to assess how realistic a truce is,” ING noted. “We expect they will tread carefully on the topic, considering there are few indications so far that Russia is ready to agree to a total ceasefire in Ukraine.”
Sterling strengthened by hawkish BoE stance
GBP/USD ticked up 0.1% to 1.3447, supported by a stronger-than-expected hawkish faction within the Bank of England. Although the BoE cut rates by 25 basis points, four of its nine policymakers pushed to keep rates unchanged, signaling a potential pause in further cuts.
“The large hawkish dissent places greater emphasis on future inflation prints. A more convincing moderation now appears necessary to have another 2025 cut fully back in the price,” ING said.
Yen finds support amid tariff relief
USD/JPY edged up 0.1% to 147.23 after June household spending figures came in weaker than expected, suggesting ongoing softness in consumer demand.
Losses in the yen were capped following assurances from Tokyo that the U.S. tariff rate on Japanese goods will be capped at 15%, according to Japan’s chief trade negotiator Ryosei Akazawa.
This helped ease worries that the 15% tariff might be stacked on top of existing levies, which would have sharply raised costs.
Other currencies
AUD/USD gained 0.3% to 0.6531 ahead of the Reserve Bank of Australia’s upcoming meeting. The market widely expects further rate cuts amid signs of slowing inflation after a surprising pause in July.
USD/CNY rose slightly to 7.1824.
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