Focus Shifts to Powell’s Testimony as U.S. Dollar Faces Pressure

Markets are turning their attention from the Middle East tensions to Washington, where Federal Reserve Chair Jerome Powell is set to begin two days of testimony before Congress on Tuesday.

Powell’s Testimony and Rate Outlook
Powell is expected to face intense questioning over the Fed’s decision to keep interest rates unchanged at its latest meeting, as well as its cautious stance on future rate cuts. The central bank’s hesitance to alter rates is largely due to ongoing uncertainties surrounding the impact of President Trump’s aggressive tariff policies.

Trump’s Criticism of Powell
President Trump, who has been vocal in his criticism of Powell, continued his campaign on social media, calling the Fed Chair a “very dumb, hardheaded person.” Trump reiterated his call for the Fed to cut rates by “two to three points,” further criticizing Powell by claiming that the U.S. would suffer due to his “incompetence.”

Potential Impact on the Dollar
Analysts have warned that any subtle shift in Powell’s testimony could signal that Trump’s political pressure has started to influence the Fed’s decisions, potentially eroding the central bank’s independence. Such a scenario could lead to significant depreciation of the U.S. dollar, as markets interpret these changes as a response to political intervention.

The testimony comes at a crucial moment, with Powell expected to provide clarity on how the Fed plans to navigate ongoing trade uncertainties and economic pressures, while also balancing inflation concerns and the potential risks to the U.S. economy. The outcome of this testimony could have a lasting impact on market sentiment, particularly regarding the dollar’s future trajectory.