The US dollar (USD) started the week weaker, weakening against other major currencies in trading on Monday (July 22). Investors reacted to renewed trade tensions ahead of the August 1 deadline and generally cautious market sentiment.

Although US economic data has been largely solid of late, the greenback is feeling pressure from continued uncertainty surrounding the Trump administration's escalating tariff threats and growing political pressure on the Federal Reserve (Fed) to cut interest rates.

Concerns over the Fed's independence intensified after Representative Anna Paulina Luna (R-Fla.) formally filed a criminal complaint against Chairman Jerome Powell with the Department of Justice (DOJ), accusing him of two specific instances of lying under oath during his testimony before Congress about the $2.5 billion renovation of the Federal Reserve headquarters.

While the legal consequences remain uncertain, the political pressure has fueled investor concerns and added further uncertainty to already fragile market sentiment. The timing is particularly sensitive, as markets continue to grapple with mixed signals from Fed officials regarding a potential interest rate cut in July and lingering doubts about the central bank's ability to operate free from political interference.

Speaking on CNBC on Monday, Treasury Secretary Scott Bessent sharply criticized the Federal Reserve, stating that it was time to "examine the entire institution and see if they've been successful." His remarks further exacerbated concerns about potential political pressure on the Fed, eroding confidence in its independence and raising uncertainty about the policy outlook. Bessent went further, dismissing the Fed's inflation warnings. "They're spreading fear about rates," he said, insisting that inflation remains under control.

The US Dollar Index (DXY), which measures the greenback against six major currencies, continued its intraday decline after posting two consecutive weekly gains. During American trading hours, the index was trading near 97.90, weakening further amid rising policy tensions and shifting interest rate expectations.

After a turbulent week marked by new tariff threats and reports that President Trump was considering firing Fed Chairman Jerome Powell, a claim he later dismissed as "highly unlikely," the US Dollar Index still managed to maintain modest gains.

Mixed signals from Fed officials about the possibility of a July rate cut added to the uncertainty, but strong economic data, including solid Retail Sales and a healthy labor market, provided support for the greenback. The DXY ended the week up 0.62%, demonstrating its resilience in the face of political noise and policy tensions. However, broader trends point to underlying weakness in the US dollar.

Looking ahead, the US economic calendar is relatively quiet, and the Fed is currently in a "blackout" period ahead of its July 30 policy meeting, meaning no official comments on monetary policy are expected from Fed members. Although Fed Chairman Jerome Powell and Governor Michelle Bowman are scheduled to speak on Tuesday, their statements are expected to avoid policy topics. With the Fed absent, the market will be watching the preliminary S&P Global Purchasing Managers' Index (PMI) data on Thursday and Durable Goods Orders data on Friday for fresh clues about the US economy and the Fed's next steps. (alg)

Source: FXstreet