Dollar's Rebound Amid Trade Tension Eases Market Concerns

The U.S. dollar saw a tentative rebound against major currencies as President Trump signaled a pause on threats to dismiss Federal Reserve Chair Jerome Powell, amid de-escalating trade tensions with China. The market reaction was cautious, reflecting ongoing concerns over policy stability and trust in the administration.

The U.S. dollar registered a modest recovery against its major counterparts on Wednesday, buoyed by the prospect of reduced trade tensions and President Donald Trump stepping back from threats to dismiss Federal Reserve Chair Jerome Powell. This shift provided some relief to investors wary of potential threats to the Fed's independence.

In a late Tuesday statement in the Oval Office, Trump clarified, 'I have no intention of firing him,' while expressing a preference for lower interest rates. Market analyst Lee Hardman noted Trump's denials as a positive signal. Trump and Treasury Secretary Scott Bessent alluded to potential de-escalation in U.S.-China trade tensions, promising a dramatic cut in tariffs, should a trade deal be reached.

The dollar's initial surge settled later in the day, as the market remained cautious given the unpredictability of U.S. policy shifts. The euro weakened slightly to $1.1397 amid eurozone economic concerns, reinforcing the dollar's appeal. Despite gains, skepticism regarding Trump's reliability persists, dampening full market confidence.

(With inputs from agencies.)