USD Faces Fed Independence Risks as Major Pairs Trade Sideways

The US Dollar Index remains range-bound near 104.50 as traders weigh concerns over potential Federal Reserve independence risks against upcoming economic data. EUR/USD continues to hover around 1.0850, showing limited directional bias ahead of Friday's crucial US PCE inflation data. USD/CAD trades near 1.3550, supported by diverging monetary policy expectations between the Fed and Bank of Canada. NZD/USD holds steady at 0.6200, with the kiwi finding support from improved risk sentiment. Markets appear to be discounting political pressures on Fed independence, though this could emerge as a volatility catalyst. Technical indicators suggest most major pairs remain trapped in consolidation patterns, awaiting a fundamental catalyst for directional breakouts. The upcoming PCE data release could provide the momentum needed to break current ranges across major dollar pairs.