Trump's attack on the Fed sends the dollar to its lowest level in a year
Bloomberg reports that the dollar fell to its lowest level since January 2024 and US stock index futures fell after Donald Trump's criticism of the Fed raised concerns about its independence.
The dollar weakened against all major currencies after National Economic Council Director Kevin Hassett said Friday that Trump was exploring whether he could fire Federal Reserve Chairman Jerome Powell.
"The comments prompted hedge funds to sell the dollar on Monday, traders said. Gold, which typically has an inverse relationship with the U.S. currency, rose to a record. Treasuries tumbled and the Japanese yen strengthened," the publication said.
The agency recalls that last week, Trump, disappointed that the Fed had not moved to lower interest rates, wrote on social media that “Powell’s resignation must happen as soon as possible!”
Financial analysts say criticism of the Fed not only undermines the principle of central bank independence, but also risks politicizing U.S. monetary policy in a way that will deeply worry markets.
“Frankly, Powell’s dismissal is a confidence-shattering move. If the Fed’s credibility is questioned, it could seriously erode confidence in the dollar. Markets may continue to demand a political risk premium on dollar assets, especially if this narrative gains traction in the coming weeks and days,” said Wong, a Singapore-based forex strategist at Oversea-Chinese Banking Corp.
“The decline in U.S. assets suggests that the once-popular “America First” strategy — buying winning assets when the U.S. outperforms other countries — is backfiring after Trump ratcheted up global tariffs, rocking the Treasury market and wiping trillions off global equities. The dollar was already under pressure after the president imposed tariffs, with the Bloomberg Currency Strength Index falling for three weeks in a row,” the report said.
The euro and the Swiss franc were among the biggest gainers, with the former rising to its highest level in three years.
"We believe dollar weakness will continue. The attack on Fed independence is intensifying. Admission that this is even being considered should be taken very seriously and negatively," wrote Win Ting, head of global market strategy at Brown Brothers Harriman & Co., on social media.
Trump was also criticized in the EU:
"By firing Powell, Trump will jeopardize confidence in the dollar and destabilize the US economy," warned French Finance Minister Eric Lombard.
Trump's attack on the Federal Reserve sent the dollar to its lowest level in a year.