Reports from The New York Times suggest that U.S. President Donald Trump has prepared a document intended to be used in an attempt to dismiss Federal Reserve Chairman Jerome Powell. Following these still unconfirmed reports, the U.S. dollar weakened, as such a move could not only potentially undermine foreign investors’ confidence in the American financial system, but also disrupt the Federal Reserve’s monetary policy, given Trump’s repeated calls in recent months for a series of interest rate cuts.
U.S. law imposes numerous legal constraints on any attempt by the President to remove the Fed Chair. In Powell’s case, Trump would likely invoke the "gross incompetence" clause as justification. Trump has frequently lashed out at Powell, accusing him of failing to cut interest rates and insisting they should have been reduced much earlier, claiming current levels are weighing on the U.S. economy.
Following the NYT report, gold prices rose more than 1%, EURUSD gained nearly 0.7%, and USD Index (USDIDX) futures declined. Volatility on Wall Street has increased, though the market reaction remains measured rather than dramatic. The prospect of accelerated rate cuts in the U.S. could, in theory, improve growth conditions for the stock market and encourage a shift toward risk assets.
EURUSD (H1 chart interval)
Source: xStation5
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