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The U.S. dollar weakened on Friday as recent bullish momentum stalled, pressured by declining Treasury yields and unexpectedly dovish comments from Federal Reserve Governor Christopher Waller. Renewed criticism of the Fed by President Donald Trump further undermined investor sentiment, creating confusion about future monetary policy. Although the greenback pared some losses after stronger-than-expected University of Michigan consumer sentiment data was released at 10 a.m., early session weakness persisted throughout the day. The dollar index (DXY) ultimately slipped 0.23%, reflecting fragile market confidence. Treasury yields retreat, housing data mixed U.S. Treasury yields declined across the curve by 2 to 5 basis points, signaling caution about the economic outlook despite slightly steeper 2s-10s spreads. Mixed housing data added uncertainty: total housing starts exceeded forecasts, but the critical single-family segment fell 4.6% to an annualized rate of 883,000, suggesting underlying softness in economically sensitive areas. Currency markets mixed amid shifting sentiment EUR/USD rebounded modestly from recent lows, gaining 0.21% as dollar strength faded. In contrast, USD/JPY flipped briefly into positive territory (+0.11%) driven more by political uncertainty in Japan than true dollar resilience, with technical momentum stalling at the daily Ichimoku cloud. The Australian dollar recovered (+0.25%) initially but lacked sustained follow-through as broader risk appetite weakened. Sterling remained directionless, with GBP/USD down marginally by 0.04%, indicating uncertainty about the UK's economic trajectory. Yen crosses highlighted uneven sentiment, with EUR/JPY gaining 0.32%, GBP/JPY up 0.08%, and AUD/JPY climbing 0.37%, reflecting nuanced regional and risk dynamics. Equity markets cautious amid renewed tariff fears U.S. equities were cautious as the S&P 500 slipped by 0.09%, weighed down by fears that the Trump administration might soon impose substantial new tariffs—between 15% and 20%—on European Union goods, as reported by the Financial Times. This development rekindled trade anxieties and overshadowed the positive consumer sentiment reading. The blend of dovish Fed remarks and escalating tariff threats injected additional uncertainty into market sentiment, restraining bullish enthusiasm despite selective optimism elsewhere. Commodity markets signal mixed risk appetite Commodity markets diverged as investors navigated conflicting signals. WTI crude oil dipped slightly by 0.17%, reflecting investor uncertainty amid mixed U.S. economic data and concerns over Russian supply risks due to potential EU sanctions related to Ukraine. Copper surged impressively by 1.52%, buoyed by robust Chinese demand, optimism around U.S.-China trade relations, and improved global risk sentiment, marking a strong contrast to broader market caution. Meanwhile, gold rose 0.4% on dollar weakness and persistent geopolitical ambiguity, underscoring ongoing investor caution despite selective risk-taking elsewhere. Overall, Friday's market dynamics highlighted investors' complex balancing act between hopes of global economic stabilization and ongoing risks posed by trade tensions and uncertain monetary policy directions.

The U.S. dollar’s seven-day advance abruptly reversed course on Wednesday after reports indicated President Donald Trump was seriously considering firing Federal Reserve Chair Jerome Powell. These headlines sparked sharp volatility, initially pressuring the greenback significantly. Although Trump later described the reports as "highly unlikely" and dismissed them as untrue, he acknowledged ongoing frustration with Powell over interest rates, leaving markets wary about the Fed's leadership and future monetary policy. Earlier, the dollar had drawn robust support from upbeat bank earnings and reassuring economic data, notably softer-than-expected June producer price figures and encouraging signs of manufacturing recovery. U.S. Trade Representative Jamieson Greer’s commitment to reducing America's $1.2 trillion trade deficit had also bolstered investor confidence. However, the Powell speculation undermined these bullish factors, causing the dollar index to retreat toward its critical 21-day moving average at 97.75, as investors cautiously awaited upcoming economic releases. EUR/USD volatile amid tariff and policy uncertainty EUR/USD traded within a wide 160-pip range before stabilizing modestly higher, but it remained below the crucial 21-day moving average at 1.1672. Markets closely monitored EU trade chief Maros Sefcovic’s trip to Washington aimed at preventing disruptive U.S. tariffs. Encouragingly, the euro’s one-month risk reversal rose above parity, signaling easing bearish sentiment and potentially supporting further stabilization. Nonetheless, uncertainty regarding U.S. monetary policy and transatlantic trade negotiations continued to weigh on sentiment. Sterling boosted by surprise UK inflation spike GBP/USD jumped temporarily towards its pivotal 55-day moving average at 1.3483 after UK inflation data for June surprised markets, accelerating sharply to 3.6%. This unexpected rise in CPI challenged prior expectations of imminent Bank of England easing, creating renewed debate on the BoE’s next policy move. However, BoE rate-setter Catherine Mann voiced caution, warning that sustained demand without matching supply-side improvements could produce a risky economic "sugar high," tempering market enthusiasm and highlighting underlying vulnerabilities in Britain's economic outlook. USD/JPY retreats amid falling yields and tariff threats USD/JPY fell sharply, following declines in U.S. Treasury yields triggered by Powell-related uncertainty. Traders significantly trimmed bullish yen positions, although key technical supports around the 200-hour moving average and the July 10 peak (146.78) held firm, indicating lingering buying interest. Further complicating yen sentiment, President Trump indicated intentions to enforce a 25% tariff on Japanese imports from August 1, heightening bilateral tensions and risk premiums around the yen’s outlook. Treasury yields fall; equities rise cautiously Treasury yields broadly retreated, falling by up to 7 basis points across the curve, although the 2-year to 10-year spread modestly steepened to around +53.2 basis points. Equity markets reacted positively despite volatility, with the S&P 500 climbing 0.31%, largely driven by gains in healthcare stocks. However, investor caution persisted amid ongoing trade uncertainties and Fed leadership questions. Mixed commodities reflect cautious investor sentiment Commodity markets exhibited mixed performance. WTI crude oil edged 0.33% higher, supported by underlying demand strength despite rising inventories. Gold benefited from lower Treasury yields and market caution, rising by 0.76%. Conversely, copper prices declined by 0.75%, reflecting persistent investor unease over global trade tensions and broader economic uncertainties.