The U.S. dollar traded mostly steady on Tuesday in a volatile session, after U.S. President Donald Trump announced the dismissal of Fed Governor Lisa Cook, marking his latest challenge to the Federal Reserve’s independence.

At 04:35 ET (08:35 GMT), the Dollar Index, which measures the greenback against six major peers, stood flat at 98.320, recovering after an earlier drop of nearly 0.4% following Trump’s announcement.

This came after the dollar posted its strongest daily gain of the month on Monday.

Fed independence under scrutiny

Trump stated in his letter to Cook that she was being removed over alleged irregularities in mortgage loan applications. Cook responded that the president has no authority to dismiss her and that she will not resign.

No U.S. president has ever attempted to remove a Fed governor, leaving the next steps uncertain. However, Cook is widely expected to challenge the dismissal, with the case likely ending up before the Supreme Court.

“Following Adriana Kugler’s resignation and the appointment of Stephen Miran, the Fed’s board is beginning to tilt in Trump’s direction. Markets will inevitably question the Fed’s independence, which could steepen the yield curve and weigh on the dollar,” ING analysts noted.

Separately, this week’s U.S. data calendar features consumer confidence today, second-quarter GDP revisions on Thursday, and the core PCE inflation report on Friday.

“Additionally, Fed Governor Christopher Waller will deliver a key policy speech on Thursday,” ING added. “He supported a July rate cut and is considered a leading candidate to succeed Powell as Fed Chair next May.”

Euro pressured by French political uncertainty

In Europe, EUR/USD slipped 0.1% to 1.1607, pressured by ongoing political turmoil in France.

The country’s three main opposition parties announced they would not support Prime Minister Francois Bayrou’s Sept. 8 confidence vote on budget measures.

If the government falls, President Emmanuel Macron could either appoint a new prime minister, keep Bayrou as head of a caretaker government, or call a snap election.

Macron previously lost Prime Minister Michel Barnier to a no-confidence vote in late 2024, just months after his appointment following a snap election that July.

“The key question for the euro is whether French political risks spill over into broader euro sentiment, or remain a France-specific issue,” ING commented.

GBP/USD held steady at 1.3466, supported by a hawkish stance from the Bank of England.
“After the BoE’s hawkish shift this month, markets are pricing less than a full 25bp cut this year (12bp currently priced) and fewer than two cuts by mid-2026,” ING said.

Muted Asian trading

In Asia, USD/JPY edged down to 147.76 as the safe-haven yen gained modestly.

USD/CNY rose 0.2% to 7.1616, while AUD/USD dipped to 0.6478 after the Reserve Bank of Australia’s August 11–12 meeting minutes suggested further policy easing may be required over the next year.