USD consolidates, trump criticizes Powell - Scotiabank

The US Dollar (USD) is tracking a little higher in rather calm and generally featureless trade. European stocks are lower, following yesterday's losses, but US equity futures were mildly higher, reflecting positive comments ('great progress') by President Trump on US/Japan trade talks, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD mildly higher, consolidates

"Yesterday, stocks responded poorly to Fed Chair Powell suggesting that tariff policy could create tension between the central bank's inflation and jobs mandates while making clear that inflation was currently too high for the Fed to ease interest rate policy. By implication, Powell made it clear that the Fed was not taking its eye off the inflation ball to address market volatility."

"That prompted an early morning blast from President Trump today criticizing the Fed for not cutting rates sooner and saying that Chair Powell's 'termination can't come fast enough'. That tilted equity futures lower. The S&P 500's inability to regain early April levels and close the 'Liberation Day' gap in price action leaves a negative technical look to the charts. A period of volatility and uncertainty around tariffs and their consequences remains in store for markets generally, it would seem."

"Pressuring the Fed and using the word 'termination' may not help ease foreign investor concerns about the outlook for Fed independence or US markets generally. While the DXY is a little firmer on the session, the index remains in consolidation mode and is barely trading off last week's low. Risks here remain geared towards more losses and a sustained push under the 99 level for the index."