The US dollar recovered during Thursday’s trading after President Donald Trump dismissed fresh rumors of his intent to fire Federal Reserve Chair Jerome Powell. Meanwhile, a strong earnings season helped end a four-day losing streak for European stock markets.
The pan-European Stoxx 600 index (.STOXX) opened notably higher, supported by record order volumes announced by Swiss engineering giant ABB, and a record profit of $13.5 billion reported by Taiwanese chipmaker TSMC. Investor sentiment was also buoyed by renewed optimism over a potential trade agreement between the EU and the US following talks in Washington.
Markets were also awaiting key US data on retail sales and jobless claims for further insight into how tariffs are impacting the economy, alongside the European Commission’s proposal for a significant increase in the EU budget.
Currencies in the Spotlight
Currency markets remained the primary focus. The US dollar rose 0.4% to $1.16 per euro, rebounding to levels seen before what Société Générale analyst Kit Juckes called “Wednesday’s madness,” when reports that Trump was preparing to fire Powell sent markets into a brief panic—before Trump later denied the claim.
In Japan, the dollar found additional support as polls showed that Prime Minister Shigeru Ishiba’s coalition risked losing its Senate majority in upcoming elections. This political uncertainty pushed the yen to its weakest level since April, trading at 148.73 per dollar.
Data also showed that Japanese exports are beginning to suffer from tariffs, with shipments declining for a second straight month. Meanwhile, the Australian dollar dropped 1% overnight following weak employment data.
Juckes noted: “The market is heavily exposed against the dollar, and now that we’re deep into summer, some investors have begun buying the greenback again.”
US equity futures pointed to a slightly higher open on Wall Street later in the day. In Europe, stocks rose 0.7%, snapping a four-day losing streak, while Asian markets saw gains between 0.3% and 0.6%, including the Nikkei (.N225), Taiwan Weighted (.TWII), and China’s CSI 300 (.CSI300).
In a notable development in the M&A space, Canadian retailer Alimentation Couche-Tard (.ATD.TO) announced it was withdrawing its $47 billion bid to acquire Japan’s Seven & i Holdings (.3382.T), citing a “lack of constructive engagement” from the operator of the 7-Eleven convenience store chain. Shares of Seven & i fell to a three-month low, ending the day with a loss of over 9%.
Trump Calms Markets—For Now
Trump’s swift denial of the Powell rumors helped temporarily stabilize volatile markets, though he left the door open to the possibility and reiterated his criticism of the Fed Chair for not cutting interest rates.
Francesco Pesole, analyst at ING, wrote: “After yesterday’s panic, markets may have become a bit more resilient to headlines on this issue,” adding, “But during that hour, we saw the expected reaction: a sharp steepening of the US yield curve and a notable drop in the dollar.”
Short-term US Treasury yields declined amid speculation that any potential Powell replacement would be ultra-dovish, likely favoring deeper and faster rate cuts.
Meanwhile, the yield on 10-year US Treasuries stabilized at 4.4714% during European trading, while German bund yields held steady at 2.695% after hitting their highest level since late March earlier in the week.
As of 11:59 GMT, the US Dollar Index had risen 0.3% to 98.7, after touching a high of 98.8 and a low of 98.3 during the session.
