USD weakens as Fed's Barr signals patience on rate cuts amid tariff concerns

The US Dollar Index has softened 0.2% to 105.85 as Federal Reserve Vice Chair Michael Barr endorsed a wait-and-see approach to monetary policy, aligning with Chair Powell's cautious stance. Barr highlighted the dual impact of potential tariffs, which could simultaneously push inflation higher while slowing economic growth and increasing unemployment. His emphasis on protecting low-income households from inflation's burden suggests the Fed remains data-dependent rather than rushing to cut rates. Market participants interpret Barr's comments as another dovish voice supporting Powell's patient approach, isolating hawkish members Waller and Bowman. The dollar's weakness has provided relief to major pairs, with EUR/USD testing 1.0420 resistance and GBP/USD approaching 1.2550. Traders are now positioning for potential dollar volatility as tariff uncertainty continues to cloud the inflation outlook, with immediate support for DXY at 105.50.