The U.S. dollar has started to bounce back in recent days, despite recent turbulence caused by political shake-ups and weak economic data. A report showing lower-than-expected job growth in July, coupled with unexpected changes at the top of key federal institutions, has rattled markets — and investors are now anxiously watching whether the Federal Reserve will indeed cut interest rates as early as September.
🎯 Dollar Rebounds After Sharp Drop
After President Trump dismissed Bureau of Labor Statistics chief Erika McEntarfer and Fed Governor Adriana Kugler resigned, the dollar plummeted — falling 1.5% against the euro and 2% against the Japanese yen. It also lost more than 1% against a basket of global currencies.
However, on Monday the greenback regained some strength — climbing to 146.60 yen, and gaining slightly against both the euro and the pound. The U.S. dollar also ticked up modestly against the Australian and New Zealand dollars. Meanwhile, Treasury yields continue to fall — with 2-year yields hitting a 3-month low of 3.659%, and 10-year yields dropping to 4.206%.
⚡ Markets Strongly Expect a September Rate Cut
According to IG’s Tony Sycamore, the market reacted decisively and swiftly — with investors now pricing in a 95% chance of a 25-basis-point rate cut by the Fed in September. David Doyle, chief economist at Macquarie Group, also believes the weak U.S. labor report will push the FOMC to adjust its outlook and lean toward easing.
🧨 MRB Warns: Weakening the Fed Could Backfire
Independent research firm MRB Partners has issued a stark warning. They argue that increased political interference in the Fed’s decisions could erode confidence in the U.S. economy. They caution against a “dangerous scenario” in which the government manipulates interest rates to boost short-term growth — potentially triggering bond market turmoil and forcing the Fed to directly purchase government debt.
This, they say, could ultimately jeopardize the dollar’s status as the world’s reserve currency. MRB adds that the economy could become overly dependent on ultra-low short-term rates, leaving the central bank reluctant to raise rates — even if inflation surges.
🧩 Private Sector at Risk Too
Politicizing the Fed wouldn’t only affect the public sector. According to MRB, it could significantly impact private markets as well. Ironically, although Trump is pushing for lower rates to fuel growth, the long-term result could be the opposite: a volatile, unstable environment that undermines investor trust.
🔹 Summary: The U.S. dollar is recovering, but uncertainty looms. A September rate cut is widely expected, but analysts warn that too much political pressure on the Fed could do lasting harm to both the economy and the currency.
#usd , #FederalReserve , #fomc , #Inflation , #dollar
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