USD/JPY consolidates near 147.90 as Fed’s Cook vows to stay

• The US Dollar bounces up from lows as Fed Governor Cook refuses Trump's order to resign.

• Trump's attempt to fire Cook eroded confidence in the central bank and hit the US Dollar on Monday's late trading.

• The Greenback is picking up after Friday's sell-off, following Powell's hints at lower interest rates.

The US Dollar is regaining lost ground across the board amid a new twist in the Federal Reserve saga, as Governour Lisa Cook dismissed Trump’s call to resign and committed to carry on with her duties at the Central Bank.

The US Dollar has bounced up from lows right above 147.00 on Tuesday’s early trading and is now consolidating within a tight range around 147.80, with Monday’s highs at 147.93 holding bulls for now.

US President Trump shocked investors on Monday, announcing an order to fire Cook in an unprecedented move, of unclear legal backing. The US Dollar reacted with losses amid investors’ concerns about the Fed’s credibility, but is picking up again after Cook committed to remaining in her duties.

Fed easing hopes are weighing on the USD

The pair depreciated more than 1% on Friday following a dovish speech by Federal Reserve Chairman Jerome Powell, who sounded more open to cutting interest rates in the coming months, citing the downside risks threatening the labour market.

At the same time, BoJ Governor Ueda warned about the inflationary impact of growing wages, suggesting that the conditions are set for a further rate hike. Later this week, the Tokyo CPI figures are likely to shed some more light on this topic.

In this context, the focus is on Friday’s PCE Prices Index, the Fed’s inflation gauge of choice. The market would celebrate moderate inflation figures that would practically confirm a rate cut after the September meeting. Such an outcome might accentuate the BoJ-Fed monetary policy divergence to the detriment of the US Dollar.