Dollar's August Tumble Amid Fed Independence Concerns
The dollar faces a 2% drop in August due to expectations of Federal Reserve rate cuts and concerns over central bank independence. President Trump's attempts to influence the Fed, including firing board member Lisa Cook, raise fears around long-term interest rates and inflation.
On Friday, the dollar wavered, pointing to a 2% decline in August as the likelihood of the Federal Reserve cutting interest rates next month increased. Concerns regarding threats to the U.S. central bank's autonomy persisted, influenced by President Donald Trump's push to exert greater control over monetary policy.
The legal confrontation between Trump and Fed Governor Lisa Cook, who has sued to prevent her removal, symbolizes ongoing efforts by Trump to reshape the central bank. Analysts warn that perceived compromised independence could destabilize inflation expectations and impact long-term interest rates.
The currency market remained volatile, with the euro and other currencies gaining in August. Despite the political tensions, market reactions were restrained, reflecting a pragmatic approach to the Fed's anticipated actions on interest rates, amidst an economy growing faster than expected in the second quarter.
(With inputs from agencies.)
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