Dollar rebounds on Thursday

The US dollar index rose to around 98.7 on Thursday, recovering from a volatile session the previous day that saw the index decline amid renewed concerns over the Federal Reserve’s independence. Investor nerves were shaken by reports suggesting that President Donald Trump might dismiss Fed Chair Jerome Powell, fueling uncertainty about the central bank’s autonomy and future monetary policy direction.

However, market turmoil eased considerably after Trump publicly denied these reports, describing any potential firing of Powell as “highly unlikely.” This reassurance helped stabilize the dollar and restore some confidence among traders.

On the data front, investors digested mixed inflation signals. Wednesday’s release showed that producer price inflation came in softer than expected, providing some relief after the strong consumer inflation figures published a day earlier, which had stoked fears of persistent price pressures.

The divergence between wholesale and consumer inflation readings has added complexity to the Federal Reserve’s policy calculus, making upcoming economic reports all the more critical.

Market participants are now keenly awaiting today’s retail sales data, which is expected to provide clearer insight into consumer spending trends and, by extension, the Fed’s likely approach to interest rates in the coming months. Strong retail sales could reinforce the case for a more hawkish stance, while weaker figures might increase speculation about a pause or even potential rate cuts down the line.

Meanwhile, in trade policy developments, President Trump indicated on Wednesday that the US would likely maintain the existing 25% tariff on imports from Japan, signaling a cautious approach amid ongoing trade negotiations. At the same time, he hinted at a potential new trade deal with India, aiming to strengthen economic ties with the fast-growing Asian market.

These comments followed the announcement of a separate agreement with Indonesia on Tuesday, reflecting the administration’s broader strategy to reshape trade relationships in the Indo-Pacific region.