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Tuesday, August 26, 2025
What’s happening: The US dollar gave back gains this morning after President Donald Trump fired Federal Reserve governor Lisa Cook.
What happened: The US dollar index had risen after Federal Reserve Chairman Jerome Powell’s speech at Jackson Hole raised speculations of an interest rate cut in September.
The greenback fell this morning on news that Trump had removed Fed governor Cook, citing allegations of mortgage fraud, which raised concerns around the central bank’s independence.
Why it matters: During his speech on Friday, Federal Reserve Chairman Jerome Powell indicated an upcoming interest rate cut at the central bank’s September meeting. Prospects of a rate cut helped the US dollar record its biggest daily surge of the month on Monday.
The latest move by Donald Trump to fire Lisa Cook signals a sharp escalation of his battle against the central bank, after he repeatedly blamed the Fed for not cutting rates quickly enough. This also raised concerns around the Fed’s independence and its ability to conduct monetary policy without government interference.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.2% to 98.25 this morning following Trump’s letter posted on social media.
The EUR/USD forex pair gained around 0.2% to 1.1648, while the GBP/USD rose about 0.2% to 1.3476. The USD/JPY declined 0.3% to 147.34.
What to watch: The Fed’s preferred gauge to measure inflation, the PCE price index, will be released on Friday.
Data on durable goods orders, consumer confidence and the Case-Shiller home price index are scheduled to be released today. Durable goods orders in the US, which dipped 9.3% to $311.84 billion in June, are expected to decline by 4% in July. Analysts expect the S&P CoreLogic Case-Shiller home price index to climb by 2.2% year-over-year in June, easing from 2.8% in May, while the consumer confidence index is projected to decline to 96.4 in August from 97.2 in the previous month.
Context: Equity markets in Asia fell this morning amid renewed trade concerns.
Details: President Donald Trump reportedly warned imposing tariffs of up to 200% on China if it failed to supply the US with rare-earth magnets.
Despite the recent concerns, China’s stocks have risen sharply in August, with the Shanghai index jumping to its strongest level since 2015.
Trump also threatened to impose fresh tariffs and restrictions on countries imposing digital taxes on US tech companies.
Bank of Japan Governor Kazuo Ueda had said over the weekend that the country’s wages are expected to surge due to a tightening labour market.
Japan’s Nikkei 225 fell 1.06% to 42,354.53 this morning, while China’s Shanghai Composite slipped around 0.2% to 3,876.65 and Hong Kong’s Hang Seng Index declined around 0.3% to trade at 25,757.21.
What to watch: Investors await the release of data on industrial profits from China on Wednesday. Profits at China’s industrial firms, which fell 1.8% year-over-year to 3.44 trillion yuan during the first half of the year, are expected to decline by 1.8% year-to-date in July.
Data on unemployment rate, industrial production and retail sales from Japan, due to be released on Friday, will also remain in focus.
Other Markets: European indices closed lower on Monday, with DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.37%, 1.59% and 0.44%, respectively.
Ukraine’s army chief, Oleksandr Syrskii, said that military forces had driven out Russia’s troops from the villages of Zeleny Hay, Mykhailivka, and Volodymyrivka in the Donetsk region. The news sent the RUB/USD pair lower in forex trading this morning.
South Korea’s composite consumer sentiment index climbed to 111.4 in August, up 0.6 points from the previous month. Consumer morale surging to its highest level since December 2017 lent support to the KRWD/USD forex pair.
Brazil’s FGV-IBRE consumer confidence index declined 0.5 points to a reading of 86.2 in August. However, the current situation index rose 1.1 points to 84.5, which sent the BRL/USD pair higher in forex trading this morning.
Poland’s retail sales surged by 4.8% year-over-year in July, accelerating from 2.2% in June. The latest reading topping market estimates of 3.5% lent support to the PLN/USD forex pair.
Mexico recorded a current account surplus of $206 million in the second quarter, following a $911 million deficit in the year-ago period. However, the MXN/USD pair slipped in forex trading this morning.
Italy’s 2-year BTP Short Term auction (1310 UAE Time), Brazil’s current account (1530 UAE Time), foreign direct investment (1530 UAE Time) and IPCA mid-month CPI (1600 UAE Time), Canada’s manufacturing sales (1630 UAE Time), as well as US Redbook index (1655 UAE Time), FHFA house price index (1700 UAE Time), Richmond Fed manufacturing index (1800 UAE Time), Dallas Fed services index (1830 UAE Time), 2-year Note auction (2100 UAE Time) and money supply (2100 UAE Time).
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