The US Dollar (USD) kicked off the week on the back foot, posting sharp losses against major peers on Monday. Although the greenback stabilized early Tuesday, investor caution remains high as political tension escalates between President Donald Trump and Federal Reserve Chair Jerome Powell.
Late Monday, Fox News reported that Congresswoman Anna Paulina Luna has referred Powell to the Department of Justice for alleged perjury, citing two separate incidents. Earlier, Treasury Secretary Scott Bessent criticized the Fed’s performance in a CNBC interview, calling for a comprehensive institutional review and accusing the central bank of “fear-mongering over tariffs” despite subdued inflationary pressure.
These developments further undermined confidence in the Fed’s independence, contributing to the USD Index’s 0.6% drop on Monday—wiping out gains from the prior week. On Tuesday, the index remains rangebound around the 98.00 mark, with Wall Street futures flat following a mixed close.
Key Market Movers
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EUR/USD is consolidating just below 1.1700 after Monday’s rally. The European Central Bank’s Bank Lending Survey, due Tuesday, may offer additional direction.
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AUD/USD retreated to 0.6500 in the European morning after the Reserve Bank of Australia’s meeting minutes signaled a cautious stance on further rate cuts.
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USD/JPY rebounded toward 148.00 following Monday’s decline, as Japan’s trade negotiator met with US Commerce Secretary Howard Lutnick in Washington.
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GBP/USD held above 1.3450 after climbing 0.6% Monday, buoyed by broad-based USD weakness.
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Gold (XAU/USD) surged over 1% on Monday to near $3,400 before slipping to $3,380 amid technical consolidation.
Looking Ahead
The US economic calendar features the Richmond Fed Manufacturing Index for July, while Fed Chair Powell and Vice Chair Michelle Bowman are set to speak later in the day. However, due to the Fed’s pre-meeting blackout period, no monetary policy guidance is expected.
