Dollar Awaits Fed Signals Amidst Central Bank Independence Concerns

On Thursday, the U.S. dollar remained stable as investors awaited policy insights from the Federal Reserve's upcoming Jackson Hole symposium. This comes amidst growing unease about the central bank's independence, following President Donald Trump's recent comments. The euro and sterling held their positions at $1.1652 and $1.3451, while the Japanese yen and Swiss franc saw slight declines.

Market expectations for a September rate cut by the Federal Reserve have diminished slightly to 82%, providing subtle support to the dollar. Investors are eager to see if Fed Chair Jerome Powell will challenge these market expectations in his Friday address. Kenneth Broux, Societe Generale's head of corporate research for FX and rates, indicated that a decision to maintain rates would likely cause a significant market reaction, potentially leading to a sell-off in U.S. treasuries and a stronger dollar.

Concerns over central bank influence were heightened after President Trump's suggestion that Fed Governor Lisa Cook resign, based on allegations by a political ally. Trump's frequent calls for Powell's resignation and his criticism of the Fed's rate policies have added to these worries. Despite these tensions, the dollar index showed a modest increase of 0.1% at 98.337. Analysts are also closely watching Powell's upcoming speech, with some cautioning that market reactions may vary based on unspecified impacts of Trump's tariffs on inflation.

(With inputs from agencies.)