Dollar, Stock Futures Drop as Trump Blasts Fed
A gauge of the dollar fell to its lowest since January 2024 and U.S. stock index futures retreated after President Donald Trump’s criticism of the Federal Reserve raised concerns about its independence
The greenback weakened against every major currency after National Economic Council Director Kevin Hassett said Friday that Trump is studying whether to fire Fed Chairman Jerome Powell. The comments prompted hedge funds to sell dollars on Monday, traders said. Gold, which typically has an inverse relationship with the U.S. currency, rose to a record. Treasury bonds fell and the yen strengthened.
Frustrated that the central bank has not moved to lower interest rates, Trump posted on social media last week that “Powell’s firing can’t come fast enough!” Blasting the Fed not only undermines the central bank’s independence, but also risks politicizing U.S. monetary policy in a way that could be deeply unsettling to markets, analysts such as Christopher Wong said.
“Frankly, firing Powell is stretching the envelope,” said Wong, a Singapore-based currency strategist at Oversea-Chinese Banking Corp. “If the Fed’s credibility is called into question, it could seriously erode confidence in the dollar. The market may continue to demand a political risk premium on USD assets, especially if this narrative gains traction in the coming weeks and days.”
The decline in U.S. assets suggests that the once-popular America-first trade — buying assets that win when the U.S. outperforms — is turning around after Trump ratcheted up global levies, roiling Treasury markets and wiping trillions off global stocks. The dollar was already under pressure after the president imposed tariffs, with a Bloomberg gauge of currency strength weakening for a third straight week.
The euro and Swiss franc were among the biggest gainers, with the euro rising to a three-year high. The currency’s weakness continued as the day progressed, with the Bloomberg Dollar Spot Index down 0.7% on Monday, adding to a 0.7% decline last week. Every Group of 10 currency gained against the dollar, with the yen, another safe-haven asset, also strengthening to levels last seen in September. That sent a Japanese stock index down more than 1%.
“The latest catalyst for dollar selling may be the pressure on Powell, but the reality is that there is no further justification needed for USD selling,” said Gareth Berry, a strategist at Macquarie in Singapore. “What has happened over the last three months is sufficient justification to warrant continued USD selling, probably for months to come.”
Trump told reporters he could force Powell out if he wanted. The president has not made clear whether that means he intends to find a way to fire the Fed chief, or simply wants Powell’s term to end as scheduled in May 2026.
How the President Can and Can’t Influence the Fed
Chicago Fed President Austan Goolsbee has warned against efforts to limit the central bank’s independence. “There is virtual unanimity among economists that monetary independence from political interference — that the Fed or any central bank can do the job it needs to do — is absolutely critical,” Goolsbee said on CBS’s Face the Nation on Sunday.
Trump would risk the dollar’s credibility and destabilize the U.S. economy if he fires Powell, French Finance Minister Eric Lombard warned.
U.S. equities posted weekly losses amid disappointment over the Fed’s rejection of the idea of a central bank supporting markets. San Francisco Fed President Mary Daly said the U.S. central bank will probably hold interest rates longer than anticipated because of inflation risks, but could still cut them later this year.
Source: Bloomberg
