Dollar slips on Fed credibility concerns, euro tops $1.1700

According to a report, U.S. President Donald Trump had toyed with the idea of selecting and announcing Federal Reserve Chair Jerome Powell's replacement by September or October, aiming to undermine his position.

"Markets are likely to bristle at any early move to name Powell's successor, particularly if the decision appears politically motivated," said Kieran Williams, head of Asia FX at InTouch Capital Markets.

"The move would raise questions about the potential erosion of Fed independence and potentially weaken credibility," he added. "If this was the case it could recalibrate rate expectations, trigger reassessment of dollar positioning."

Trump on Wednesday called Powell "terrible" for not lowering interest rates sharply, while the Fed Chair was telling the Senate that policy had to be cautious as the President's tariff plans were a risk to inflation.

Markets have nudged up the chance of a rate cut at the Fed's next meeting in July to 25%, from just 12% a week ago, and are pricing in 64 basis points of cuts by year-end, up from around 46 basis points last Friday. 0#USDIRPR

"While this stands to be the latest hammer blow to the dollar delivered by the hands of the White House, I do expect it to gain some support in the coming sessions from month-end and quarter-end rebalancing flows," said Tony Sycamore, an analyst at IG.

For now, though, the dollar was under broad pressure as the euro gained 0.4% to $1.1710 EUR=EBS, its highest since September 2021. The break of resistance at $1.1692 opened the way to the next chart target up at $1.1909.

Sterling GBP= rose 0.3% to $1.3723, its highest since January 2022, while the dollar was at its lowest in more than a decade on the Swiss franc at 0.8030 CHF=EBS. The franc also struck a record peak on the yen around 180.55 CHFJPY=.

The dollar lost 0.4% on the yen to 144.62 JPY=EBS, while the dollar index sank to its lowest since early 2022 at 97.401 =USD.