Dollar sinks again following threat to Fed independence

Welcome to this week’s Market Update.

It’s mostly bad news for the Dollar and the Pound as political strife threatens to undermine the stability of these currencies once again. The Euro continues to fare better amidst turmoil to its western compatriots. Inflation data releases this week will paint a fuller picture of the current situation.

Current rates

Rates correct as of 10:00am on Monday 30 June but may now have changed.

The Big 3

Three stories covering the latest developments in economies, currencies and borders.

Dollar sinks again following threat to Fed independence

The US dollar weakened to three-year lows last week as markets responded to growing uncertainty around Federal Reserve independence. President Trump’s recent criticism of Fed Chair Jerome Powell, and reports that a replacement could arrive months before Powell’s term ends in May, has created instability for investors. The dollar index has dropped over 10% in 2025, while traders anticipate potential rate cuts that go beyond what’s expected. Traditional monetary policy signals are being complicated by political interference, leaving currency markets to navigate between the Fed’s stated hawkish stance and the possibility of policy changes under new leadership.

[Reuters]

Optimism in Eurozone ahead of new data

Ahead of Euro inflation data due this week, forecasts currently see the rate hovering around its 2% target, meaning an increasingly favourable environment for businesses operating across European markets. This forecast signals the central bank’s confidence in bringing price pressures under control and current policy has contributed to European stocks outperforming their US counterparts by the biggest margin on record in dollar terms during the first half of 2025, a dramatic turnaround for the region’s markets. Trade talks with the US still lurk but for businesses managing European operations there are improved conditions for expansion despite subdued growth across the region.

[Morning Star]

Pound unsteady in run up to fresh inflation data

The pound faces mounting pressure as Britain’s economic momentum stalls after a strong Q1 performance. While the UK led the G-7 with 0.7% growth in the first quarter – fuelled by increased consumer spending and reduced savings – the outlook has darkened considerably since April. Recent data shows inflation edging higher to 3.4% in May, and wage growth has cooled to 5.6%, setting up crucial inflation and jobs data releases this week that could determine the Bank of England’s next move. Sterling’s resilience above 1.37 against the dollar masks deeper concerns about the government’s ability to deliver meaningful fiscal reforms. Can more substantial economic surgery be achieved without resorting to higher taxes or borrowing? Either outcome will almost certainly weigh on the pound’s prospects going forward.

[Bloomberg]

Looking forward  

• Monday: UK GDP and EUR inflation data.
• Tuesday: US manufacturing and services and earnings data.
• Thursday: US unemployment data. Likely to be up.

This week we should get further direction on how the risk-flows are playing out and further direction on the resilience of the US and UK economies

Here’s what we’re talking to our clients about 

We’re always here to support. Here are some of the conversations we’re having:

• Risk flows.
• The massive change in the overall Dollar strength from Jan to June!
• Potential roadmap for EU and UK interest rates.

The contents of this article do not constitute financial advice and are provided for general information purposes only.