DOLLAR STEADIES AFTER TRUMP’S “UNPRECEDENTED” FIRING OF FED GOVERNOR SPARKS EARLY TURMOIL
President's move to oust Lisa Cook escalates battle with central bank; Cook asserts Trump lacks authority, refuses to resign.
The U.S. dollar experienced a volatile trading session on Tuesday before stabilizing, following President Donald Trump’s unprecedented decision to fire Federal Reserve Governor Lisa Cook a move that has intensified concerns over the central bank’s independence and shaken investor confidence.
The dollar index, which tracks the currency against six major peers, recovered from an initial drop of 0.4% to trade flat at 98.42. Major currencies including the euro and sterling showed muted reactions, trading at $1.1617 and $1.3461 respectively.
The announcement came via a social media post by Trump, who cited alleged improprieties in Cook’s mortgage loans as grounds for dismissal. Cook swiftly responded, asserting that the president lacks the authority to remove her and stating her refusal to resign.
This escalation marks a new front in Trump’s long-running critique of Fed policy. Although he has frequently criticized Fed Chair Jerome Powell for not cutting interest rates, he had previously held back from direct removal threats especially with Powell’s term ending in nine months.
Kenneth Broux, head of corporate FX and rates research at Societe Generale, noted that Trump’s push for lower rates has been “well-telegraphed,” yet the direct intervention rattled markets briefly.
Money markets are now pricing in an 82% probability of a rate cut at the Fed’s September meeting, reflecting heightened expectations of monetary easing.
Meanwhile, political instability in Europe limited the dollar’s decline. In France, government bonds fell as Prime Minister Francois Bayrou faced opposition to sweeping budget cuts, raising the prospect of a no-confidence vote. The 10-year bond yield rose to 3.53%, its highest since March.
ING analysts noted, “The broader question for the euro is whether recent French news destabilises appetite for the euro more broadly.”
In Asian markets, China’s offshore yuan held near one-month highs at 7.1635 per dollar, supported by a rally in Chinese equities.
Cryptocurrencies saw mixed trading, with bitcoin edging up 0.5% and ether gaining 1.5%.
Source:NKONKONSA.com
