17.07.2025 16:14
Yesterday afternoon witnessed a dramatic surge in market volatility. A prominent US news organization initially reported that former President Donald Trump had informed Republican congressional representatives of his intention to remove Federal Reserve Chairman Jerome Powell from his post. This was swiftly followed by a Bloomberg report citing an anonymous White House source confirming the imminent dismissal, with additional outlets alleging the existence of a draft termination letter dating back to Tuesday. This unprecedented level of specificity significantly escalated tensions. Consequently, the US dollar experienced substantial losses, pushing the EUR/USD exchange rate above 1.17, as observed by Commerzbank's FX analyst, Michael Pfister.
However, this heightened tension proved short-lived. A swift reversal occurred shortly before 6 PM German time, when Trump publicly denied any plans to fire Powell. He subtly maintained an escape clause, suggesting dismissal remained a possibility pending the outcome of an investigation into Federal Reserve renovations; otherwise, he deemed such an action "highly unlikely." This statement immediately reversed the dollar's decline.
Trump's actions appear to be a calculated test of the boundaries of his influence over the Fed's independence. Despite attributing the escalation to Republican lawmakers, he positioned himself as a "more conservative" figure, even while actively seeking to undermine Powell. Verbal attacks continue to intensify, with Trump's inner circle recently focusing on accusations of fraud related to the Fed's renovation project. Even if Trump ultimately avoids dismissing Powell, his declaration yesterday that he'd only consider "low interest rate" candidates for the position indicates continued pressure on the Fed's monetary policy throughout the coming year.
Furthermore, overnight developments concerning the former president's actions added another layer of complexity to the situation. The precise nature of these developments, however, remains unspecified in the original source material. This underscores the ongoing uncertainty surrounding the former president's intentions and their potential impact on US economic policy.
