The US dollar (USD) traded with positive sentiment for the second consecutive day on Friday (July 25th), driven by upbeat US economic data and renewed optimism about trade. On Thursday, better-than-expected weekly Initial Jobless Claims and a stable Purchasing Managers' Index (PMI) figure helped ease recession fears, supporting the view that the US economy remains resilient.

At the same time, recent progress on bilateral tariff agreements between the United States (US) and Japan, Indonesia, and the Philippines has improved risk sentiment, limiting pressure on the US dollar.

The US Dollar Index (DXY), which measures the US dollar against a basket of six major currencies, strengthened slightly during European trading hours on Friday, recovering from a two-week low reached earlier in the week. At the time of writing, the index was around 97.76, up 0.27% on the day. However, caution remains warranted ahead of the August 1 tariff deadline and next week's Federal Reserve (Fed) monetary policy decision, keeping traders on guard and limiting aggressive positions in the US dollar.

US President Donald Trump made headlines on Thursday with a rare visit to the Fed's Washington headquarters, the first by a sitting US president to the central bank in nearly two decades. Trump toured the Fed's $2.5 billion renovation project with Fed Chairman Jerome Powell and Senator Tim Scott.

During the visit, Trump alleged that the project was over budget, stating that costs had ballooned to $3.1 billion. Powell quickly denied this, clarifying that the additional figure referred to a building completed five years ago and did not reflect the actual cost overruns.

Trump also used the visit to renew pressure on the Fed to cut interest rates, saying the central bank was "moving too slowly" and should do more to support growth. However, he added that he had "no plans" to remove Powell from his post, for now.

The visit, though framed as a tour, clearly had political overtones and reignited the debate about the Fed's independence. With the Fed's next policy meeting just days away, markets are closely watching how the central bank responds to the growing political pressure.

With the Fed's monetary policy decision due on Wednesday, markets widely expect interest rates to remain steady, with most projections pointing to a move as early as September. According to a recent Reuters poll, 100% of economists expect the Fed to keep its benchmark interest rate in the 4.25%-4.50% range next week. (alg)

Source: FXstreet