The US Dollar remains resilient in midweek trading as investors weigh political uncertainty surrounding President Donald Trump’s ongoing clash with the Federal Reserve. Market activity is subdued in early Wednesday sessions with no major economic data releases scheduled, though attention will turn to the upcoming US Treasury 5-year note auction later in the day.
Trump vs. Fed: legal battle looms
Fed Governor Lisa Cook is set to file a lawsuit contesting her dismissal by President Trump. During Tuesday’s Cabinet meeting, the President reiterated his readiness to accept any court ruling but downplayed the impact of Cook’s challenge. He also suggested a replacement is already identified, emphasizing that the Fed will soon have a majority leaning toward rate cuts—a stance that could weigh on long-term monetary policy expectations.
US Data: consumer confidence eases
The Conference Board’s Consumer Confidence Index declined to 97.4 in August, down from 98.7 in July. The Present Situation Index slipped to 131.2, while the Expectations Index fell to 74.8, signaling weaker sentiment on income, employment, and overall economic activity. Despite Tuesday’s mild setback, the US Dollar Index (DXY) is trading firmly near 98.50 in the European morning.
Canada: BoC holds its line
Bank of Canada Governor Tiff Macklem reaffirmed late Tuesday that the central bank has no plans to revisit its 2% inflation target. He cited persistent trade uncertainty and shifting US tariff policies as risks to stability. USD/CAD remains locked in a narrow range just below 1.3850 following modest losses earlier in the week.
Australia: inflation surprises to the upside
Fresh data from the Australian Bureau of Statistics revealed that annual CPI rose 2.8% in July, well above expectations of 2.3% and sharply higher than June’s 1.9%. The Australian Dollar initially spiked above 0.6500 but has since retreated, with AUD/USD last seen near 0.6480.
Europe: Confidence slips, politics weigh on Euro
German consumer confidence worsened, with the GfK index dropping to -23.6 for September, missing forecasts. In France, political uncertainty deepened after Prime Minister François Bayrou announced a no-confidence vote for September 8. The standoff stems from disagreements over the 2026 budget proposal, which aims to trim €44 billion in government spending. EUR/USD remains pressured, sliding toward 1.1600.
UK & Japan: currencies drift lower
Sterling edged lower, with GBP/USD testing 1.3450 after minor gains on Tuesday. Meanwhile, the Japanese Yen trades narrowly below 148.00 per dollar ahead of Tokyo CPI and July unemployment data due in the Asian session.
Commodities: Gold pauses after rally
Gold prices extended gains on Tuesday, climbing to a two-week peak above $3,390. However, profit-taking emerged in early European trading, with XAU/USD correcting lower to just under $3,380.
