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Fed Stability and Treasury Moves Offer Relief
Investor anxiety cooled after Trump clarified Tuesday that he has “no intention” of firing Powell, alleviating concerns around central bank independence. The 10-year Treasury yield dropped 8 basis points to 4.311%, reflecting a modest return to safety. The 2-year yield ticked up slightly, showing market skepticism over short-term policy shifts.
White House officials also moved to temper the fallout, with economic adviser Kevin Hassett dismissing speculation over Powell’s job security. This reversal follows a turbulent start to the week, including Trump labeling Powell a “major loser” over rate policy. The market interpreted the president’s latest remarks as a tactical retreat, stabilizing DXY in the process.
Trade Signals Lift Dollar Confidence
Sentiment was further buoyed by comments from Treasury Secretary Scott Bessent, who hinted at a “substantial” cut in tariffs should a U.S.-China deal materialize. Trump echoed this sentiment, stating that final tariff rates “won’t be zero” but could be significantly reduced. With trade discussions ongoing, 34 nations are engaged with U.S. negotiators following the administration’s temporary tariff reprieve for 90 days.
These developments allowed the dollar to gain over 1% against the yen to 143.21 before settling at 141.81, and to rise 0.4% against the Swiss franc. However, DXY remains near long-term lows against key peers like the euro and franc, signaling investor hesitation. The euro pulled back to $1.1389 after eurozone data showed stalling business growth and contraction in Germany’s services sector—providing further near-term support for the dollar.
Technical Outlook: Pivot Levels in Focus
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