The dollar index rose slightly on Wednesday, but gave up most of its gains as T-note yields fell to a 1.5-week low, impacting interest rate differentials. Concerns over Fed independence and potential capital flight if Fed Governor Lisa Cook is fired limited dollar gains.

New York Fed President Williams remains optimistic about the US economy, stating it’s slowing but not stalling. Markets expect an 86% chance of a -25 bp rate cut at the September FOMC meeting, with a 53% chance for a second cut in October.

EUR/USD fell to a 3-week low due to German consumer confidence dropping to a 5-month low and political turmoil in France. Diplomatic efforts to end the Ukraine war are stalled, with no planned meeting between Russian and Ukrainian leaders, potentially impacting tariffs and oil prices.

Swaps indicate a 3% chance of a -25 bp rate cut by the ECB at their upcoming policy meeting. USD/JPY rose slightly as the dollar strengthened, reducing safe-haven demand for the yen. Gold and silver prices rose on Wednesday, driven by concerns over Fed independence, political uncertainty in France, rising inflation expectations, and geopolitical risks.

Gold continues to find safe-haven support amid US tariffs and geopolitical risks. Fund buying of precious metals remains strong, with gold holdings in ETFs at a 2-year high and silver holdings at a 3-year high.

Read more at Yahoo Finance: Dollar Erases Early Gains as T-note Yields Fall