US Dollar Index: Stronger USD and Fed independence focus – BNY

BNY’s Bob Savage notes that the US Dollar (USD) is firmer, with US Dollar Index (DXY) slightly higher as bond yields rise and risk sentiment turns cautious. Former Fed Chair Jerome Powell, now a governor, strongly defended Federal Reserve (Fed) independence in Boston, warning that political interference in policymaker removal or regional president appointments could undermine confidence in US monetary policy.

Dollar firm as Powell defends Fed

"The new month starts with mixed risk sentiment."

"Former Federal Reserve (Fed) Chair Jerome Powell used a public speech in Boston to deliver a strong defense of Federal Reserve independence, arguing that the central bank’s credibility would be at risk if any administration gained the ability to remove policymakers over disagreements on monetary policy."

"Speaking after returning to his role as a Fed governor, Powell stressed that legal protections shielding Fed officials from political interference are essential to preserving confidence in U.S. monetary policy and noted that the executive branch has no role in selecting or overseeing regional Federal Reserve Bank presidents."

"His remarks come as the U.S. Supreme Court is expected to rule on President Trump’s attempt to remove Fed Governor Lisa Cook, a case that could have significant implications for the institution’s independence."

"Powell also emphasized the importance of preserving the Fed’s authority over the appointment of regional presidents, warning that institutional safeguards built over decades can be weakened quickly if political influence expands."