Dollar rebounds as Trump eases Fed tensions, signals trade thaw with China

The US dollar rebounded on Wednesday, climbing against major currencies after President Donald Trump eased tensions over the Federal Reserve and trade with China. The shift offered investors much-needed relief, with market sentiment buoyed by Trump’s decision not to remove Fed Chair Jerome Powell and speculation that trade tariffs on Chinese goods could be reduced.
The greenback had been under pressure, lingering near three-year lows amid uncertainty over Trump’s tariff policies and repeated criticism of the Federal Reserve. However, comments from both Trump and Treasury Secretary Scott Bessent suggested a possible thaw in US-China relations and signalled a willingness to engage in deeper economic collaboration.
Trump, speaking from the Oval Office, said: “I have no intention of firing him,” referring to Powell. “I would like to see him be a little more active in terms of his idea to lower interest rates.” The remark came after days of speculation over the Fed’s independence, which had rattled investors and triggered volatility in global markets.
The dollar index rose 0.297% to 99.86 in early Asian trading, before stabilising as cautious optimism returned. The euro slipped 0.86% to $1.132, reversing gains made earlier in the week. Helen Given of Monex USA said the renewed dialogue with China was a key factor: “People are very relieved that there’s potential for discussions between the two countries.”
Bessent reinforced that message in Washington, suggesting any easing of tariffs would not be unilateral and would depend on progress in talks with Beijing. He also voiced strong criticism of the IMF and World Bank but affirmed US support for their roles, distancing the Trump administration from earlier proposals advocating a US withdrawal.
Meanwhile, Trump hinted at further tariffs if no deals were made. “If we don’t have a deal… we’re going to set the tariff,” he said. He also suggested auto tariffs on Canada could increase, despite existing exemptions under the US-Mexico-Canada Agreement.
The markets responded positively. Dow futures jumped 1.9%, S&P 500 rose 2.6%, and Nasdaq gained 3% before the opening bell. Tech stocks surged, with Tesla up 7% after Elon Musk pledged to focus more on the company and less on Washington politics. Apple and Meta also rose sharply despite EU fines.



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