US Dollar Index (DXY)

Financial markets on Thursday witnessed a remarkable recovery of the US dollar, as the dollar index rose near the level of 98.70 points, after yesterday's volatile session ended with a decline in the greenback amid fears of a threat to the independence of the Federal Reserve.

This fluctuation came after reports indicating the intention of US President Donald Trump to dismiss Fed Chairman Jerome Powell, which Trump later denied by saying that this scenario is extremely unlikely.

Threat of Fed independence worries markets

The initial statements of President Trump showed how sensitive the markets are to any political interference in the affairs of the US central bank, as the dollar fell yesterday as speculation escalated that a more moderate Fed chairman could be appointed in the event of Powell's dismissal.

Such a move would seriously damage the US dollar, and therefore may lower short-term bond yields in anticipation of the appointment of a more moderate head of the Fed.

Economic data boost interest rate cut expectations

On the economic data front, US producer prices (PPI) recorded a surprise stabilization in June, reinforcing expectations of the Fed cutting interest rates later this year in an attempt to stimulate economic growth.

Investors are now waiting for US retail sales data due to be announced later today, which may provide further clarifications on the direction of monetary policy.

Escalating trade tensions remain a pressure factor

President Trump's trade statements continue to cast a shadow on the markets, as he confirmed on Wednesday that the United States will impose 25% tariffs on its imports from Japan, and also hinted at a possible trade agreement with India after announcing a deal with Indonesia at the weekend.

These steps reflect the continuation of the protectionist approach of the White House, which may increase the risks of slowing global growth and affect the strength of the dollar in the medium term.