The dollar index is down by -0.32% today, as threats to Fed independence weigh on the dollar. Fed Chair Powell revealed that the Justice Department’s threat of criminal charges against the Federal Reserve is a consequence of the Fed not aligning with President Trump’s calls for lower interest rates.

Fed Chair Powell disclosed that the Fed had received grand jury subpoenas from the Justice Department, threatening a criminal indictment related to his June testimony on Fed headquarters renovations. Powell emphasized that the threat of criminal charges is a result of the Fed setting interest rates based on public service, not presidential preferences.

Markets are pricing a 5% chance of a -25 bp rate cut at the FOMC’s next meeting. The dollar is showing signs of underlying weakness, with expectations of a -50 bp interest rate cut in 2026 by the FOMC, while the BOJ is expected to raise rates by +25 bp in 2026.

The dollar is facing pressure from increased liquidity in the financial system and concerns that President Trump may appoint a dovish Fed Chair. This pressure has led to a decline in the dollar, with expectations that the new Fed Chair announcement will come in early 2026, potentially impacting the dollar’s performance negatively.

Read more at Yahoo Finance: Dollar Falls and Precious Metals Soar to Record Highs as Fed Independence Threatened