The U.S. dollar dropped on Friday, setting itself up for a weekly decline amid ongoing concerns about U.S. trade tariffs and President Donald Trump’s efforts to increase his sway over the Federal Reserve.

By 04:20 ET (08:20 GMT), the Dollar Index—which measures the greenback against a basket of six currencies—fell 0.3% to 97.957, heading for roughly a 1% loss over the week.

Miran appointed to Fed board

Thursday saw the implementation of Trump’s trade tariffs, imposing levies ranging from 10% to 50% on exports from various regional economies. Though many of these tariffs were previously signaled by Trump, the dollar has weakened amid fears about their repercussions on the U.S. economy.

Recent economic data has added to worries, including a disappointing jobs report last week, softer U.S. services activity, and a rise in initial jobless claims this week. Markets now price in more than a 90% likelihood of a Fed rate cut in September, up sharply from an even chance just a week earlier.

Questions about the Federal Reserve’s independence have further weighed on the dollar. On Thursday, Trump appointed Stephen Miran, chairman of the Council of Economic Advisers, to fill a vacant Fed Board seat for the remainder of the term, following last week’s unexpected resignation of Fed Governor Adriana Kugler.

“Miran has echoed Trump’s dovish calls and Fed criticism of late, as well as downplaying the inflationary impact of tariffs,” analysts at ING noted. “He’s widely expected to join Christopher Waller and Michelle Bowman in the dovish camp for the few meetings he will attend, with a non-negligible risk he might try to build consensus for a 50bp move.”

Though temporary, this appointment likely strengthens Trump’s influence over the central bank as the administration searches for a replacement for Fed Chair Jerome Powell, whose term expires May 15, 2026. Bloomberg News reported Thursday that Fed Governor Christopher Waller is emerging as a leading candidate for the chairmanship.

Euro nudged by Ukraine peace discussions

In Europe, the euro slipped slightly to 1.1662 against the dollar, just below a one-week peak, as investors reacted positively to ongoing talks aimed at resolving the war in Ukraine.

Russian President Vladimir Putin and U.S. President Donald Trump are expected to meet soon, following talks between Trump’s envoy Steve Witkoff and Putin.

“Markets now need to assess how realistic a truce is,” ING commented. “We expect they will tread carefully on the topic, considering there are few indications so far that Russia is ready to agree to a total ceasefire in Ukraine.”

Sterling gains on hawkish Bank of England votes

GBP/USD rose 0.1% to 1.3447, supported by more Bank of England policymakers than anticipated voting to keep interest rates steady, even as the BoE cut rates by 25 basis points.

Four of the nine BoE policymakers—concerned about persistent inflation—favored holding borrowing costs steady, suggesting the BoE’s sequence of rate cuts might be nearing its conclusion.

“The large hawkish dissent places greater emphasis on future inflation prints. A more convincing moderation now appears necessary to have another 2025 cut fully back in the price,” ING said.

Yen supported by tariff relief

Elsewhere, USD/JPY edged up 0.1% to 147.23 after household spending data for June came in much weaker than expected, signaling a sustained drop in consumer spending.

However, losses in the yen were limited after Tokyo received reassurance from Washington regarding trade tariffs. Japan’s chief trade negotiator, Ryosei Akazawa, said Thursday that the effective U.S. tariff rate on Japanese goods would be capped at 15%.

His statement helped ease fears that the 15% tariff would be stacked on top of existing U.S. tariffs on Japanese products, which would have created a significantly higher overall levy.

Other markets

AUD/USD gained 0.3% to 0.6531, with attention turning to the Reserve Bank of Australia’s upcoming meeting next week. The RBA is widely expected to cut interest rates further amid persistent signs of easing inflation. Its August cut follows an unexpected pause in July that surprised markets.

USD/CNY inched higher to 7.1824.

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