Forex Today: Markets turn risk-averse as Trump renews tariff threats

Here is what you need to know on Tuesday, August 26:

The US Dollar (USD) stabilizes after fluctuating wildly in the late American session on Monday and early Tuesday. In the second half of the day, July Durable Goods Orders and the Conference Board's Consumer Confidence Index data for August will be featured in the US economic calendar.

The USD came under renewed bearish pressure after United States (US) President Donald Trump announced on Truth Social that he has fired Federal Reserve (Fed) Governor Lisa Cook by sharing a letter addressed to her. "I have determined that there is sufficient cause to remove you from your position," Trump told Cook.

In a statement shared by her attorneys, "President Trump purported to fire me 'for cause' when no cause exists under the law, and he has no authority to do so," Cook said and added that she will continue to carry out her duties as Fed Governor. The USD staged a rebound following this development. At the time of press, the USD Index was virtually unchanged on the day at 98.40.

In the meantime, Trump renewed tariff threats and caused markets to adopt a cautious stance. He said that countries that charge taxes to digital service providers from the US will face "subsequent additional tariffs." Moreover, Trump told reporters that China has to give the US magnets, or they will charge them "200% tariff or something." US stock index futures are down about 0.3% in the European morning.

EUR/USD lost more than 0.8% on Monday and erased the majority of the gains it recorded on Friday. The pair fluctuates in a tight channel above 1.1600 in the European morning on Tuesday.

GBP/USD turned south on Monday and fell about 0.5% on a daily basis. The pair stays in a consolidation phase at around 1.3450 to start the European session.

The Reserve Bank of Australia (RBA) published the Minutes of its August monetary policy meeting on Tuesday, which showed that board members agreed that some further reduction in the cash rate is likely to be needed in the coming year. AUD/USD struggles to gain traction on Tuesday and trades below 0.6500.

Following Friday's sharp decline, USD/JPY gathered bullish momentum and gained more than 0.5% on Monday. After spending the Asian session on the back foot, the pair reversed its direction and was last seen trading marginally higher on the day, slightly below 148.00. Japanese Finance Minister Katsunobu Kato said earlier in the day that he is "alarmed over FX moves, including those driven by speculators."

After posting small losses on Monday, Gold benefited from risk-aversion and pushed higher early Tuesday. As of writing, XAU/USD was trading at a fresh two-week high near $3,380.