US Dollar Index retreats as Powell inquiry reignites worries over Fed autonomy

US Dollar Index Slips Amid Fed Independence Concerns

The US Dollar Index (DXY), which measures the value of the dollar against a basket of six major currencies, declined on Monday as worries about the Federal Reserve's autonomy impacted investor confidence. At the latest check, the DXY hovered near 98.73, marking a decrease of approximately 0.41% for the day.

After last week’s surge to a one-month high, the index has given back some gains, reflecting a slowdown in upward momentum. This shift follows news that the US Department of Justice (DoJ) issued grand jury subpoenas on Friday as part of a criminal probe related to Fed Chair Jerome Powell’s Senate appearance regarding the $2.5 billion renovation of the Fed’s headquarters.

In a video message released late Sunday, Jerome Powell clarified that the Justice Department’s investigation “does not concern my testimony last June or the Federal Reserve’s building renovations.” He further stated that the threat of criminal charges stems from the Federal Reserve basing interest rate decisions on its independent judgment of what best serves the public, rather than aligning with the President’s preferences.

Kevin Hassett, Senior Adviser at the White House, commented on CNBC Monday that the renovation project has experienced “significant cost overruns,” but he does not believe the Fed’s approach to interest rates is connected to the recent developments.

President Donald Trump has often criticized Jerome Powell for not cutting interest rates more aggressively. Last year, Trump also sought to remove Fed Governor Lisa Cook, citing mortgage fraud allegations, and successfully appointed Stephen Miran to the Board of Governors.

Since joining the Board, Miran has consistently voted for 50 basis-point rate reductions at every policy meeting, highlighting the increasing political influence on US monetary policy decisions.

Looking ahead, President Trump is expected to name a successor to Jerome Powell, whose term as Fed Chair concludes in May 2026. Market participants largely anticipate that Trump will select someone whose policy outlook aligns more closely with his own.

Economic Data and Market Outlook

On the economic front, last week’s US employment figures indicated that the labor market remains relatively stable, with a slight drop in the unemployment rate despite the headline NFP number missing forecasts.

These results have reduced the likelihood of an imminent Fed rate cut, though traders still anticipate the possibility of two reductions later this year. Market attention now shifts to the upcoming US Consumer Price Index (CPI) report, due Tuesday, for further insight into the Fed’s future policy direction.