The U.S. dollar traded largely unchanged Tuesday in volatile trading, after U.S. President Donald Trump announced he had fired Fed Governor Lisa Cook, in his latest assault on the U.S. central bank's independence.

At 04:35 ET (08:35 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded basically flat at 98.320, recovering after falling as much as 0.4% after Trump;'s announcement.

This followed the U.S. currency registering its biggest daily gain of the month on Monday.

Fed independence in question
Trump said in the letter to Cook he was firing the governor over alleged improprieties in obtaining mortgage loans. In response, Cook said Trump has no authority to fire her from the central bank, and she will not resign.

No president has attempted to remove a Fed governor before, so just what follows from here is unclear, but it's likely a Cook challenge to Trump's firing will end up in the Supreme Court.

"After the resignation of Adriana Kugler and the appointment of Stephen Miran, the influential governing board is starting to lean towards Trump's way. Investors will naturally start to increasingly question the independence of the Fed, which would result in a steeper yield curve and a weaker dollar," said analysts at ING, in a note.

Away from politics, the U.S. data calendar this week sees U.S. consumer confidence today, a revision to second-quarter GDP on Thursday and core PCE inflation on Friday.

"We'll also hear an important speech on monetary policy from the Fed's Christopher Waller on Thursday," ING added. "He voted for a rate cut in July and is seen as one of the front-runners to replace Powell as Fed Chair next May."

Source: Investing.com