USD weakens as markets dismiss Trump-Powell tensions amid risk-on sentiment

The US Dollar Index has retreated 0.2% to 108.50 as markets shrug off political tensions between President Trump and Fed Chair Powell, maintaining risk-on momentum. Despite Trump's public criticism potentially threatening Fed independence, investors continue favoring risk assets, leading to dollar selling pressure across major pairs. The political drama has prompted some institutional investors to reassess their dollar exposure, with concerns that compromised Fed independence could undermine monetary policy credibility. EUR/USD has gained 25 pips to 1.0275, while GBP/USD advanced to 1.2150. Market participants appear focused on upcoming economic data rather than political noise, with Wednesday's US CPI release expected to provide clearer direction. Technical indicators suggest the dollar index faces immediate support at 108.30, with resistance at 109.00. Sustained political pressure on the Fed could accelerate dollar weakness if markets perceive threats to institutional independence.