The US dollar slipped on Monday, pulling back after two consecutive weeks of gains, as investors turned their attention to rising trade tensions and uncertainty surrounding Federal Reserve policy.
Reports surfaced that Treasury Secretary Scott Bessent attempted to dissuade President Trump from firing Fed Chair Jerome Powell—raising fresh concerns about central bank independence. Political pressure on the Fed may continue to weigh on investor confidence and undermine the institution’s credibility, adding downside risk to the US currency.
Trade tensions also intensified after Commerce Secretary Howard Lutnick confirmed that the August 1 deadline for new tariffs remains firm. Markets are growing increasingly cautious as the deadline approaches, with the potential for additional tariffs further clouding the trade outlook.
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SubscribeMeanwhile, Federal Reserve Governor Christopher Waller stated the Fed should consider cutting interest rates before labor market conditions worsen further. His comments support the possibility of a rate cut as early as the upcoming July meeting.
US Treasury yields responded, with the 10-year note falling below 4.39%, extending its recent downward move. Market expectations for rate cuts are putting additional pressure on long-term yields, though ongoing political uncertainty could keep bond markets volatile in the short term.
Looking ahead, attention turns to Tuesday’s highly anticipated speech by Fed Chair Jerome Powell. A dovish tone could reinforce expectations for a July rate cut, putting renewed pressure on the dollar and Treasury yields. However, if Powell signals caution or patience, the greenback may find temporary support.
