Dollar Slips as Trump Denies Intention to Fire Fed Chair Powell
The U.S. dollar dipped on Wednesday but recovered slightly from session lows after President Donald Trump denied reports suggesting he plans to fire Federal Reserve Chair Jerome Powell.
Bloomberg reported that Trump was likely to dismiss Powell soon, and a separate Reuters source said Trump had floated the idea to Republican lawmakers, many of whom reportedly supported it. However, Trump later dismissed the speculation, stating, “I don’t rule out anything, but I think it’s highly unlikely unless he has to leave for fraud.” He was referring to criticisms over a $2.5 billion renovation project at the Fed’s headquarters, which some Republicans have claimed is mismanaged.
Ousting Powell before his term ends in May would likely rattle financial markets and damage confidence in the Fed’s independence—potentially undermining the dollar’s role as a global safe-haven currency.
“What can destroy faith in the U.S. dollar is any attack on the Fed’s independence and authority,” said Juan Perez, senior trading director at Monex USA.
Trump has repeatedly criticized Powell for not lowering interest rates, arguing they should be at 1% or lower.
Following the news, the dollar index fell 0.25% to 98.34. The euro gained 0.3% to $1.1633, while the dollar dropped 0.7% against the yen to 147.82. The British pound rose 0.24% to $1.3411.
ING strategist Francesco Pesole noted that if Powell were actually removed, the dollar would likely face a sharper sell-off. “Euro/dollar should be much higher. If Powell goes, markets will start pricing in a rate cut as early as September,” he said. The euro climbed as high as $1.1721 during Wednesday’s session.
Fed funds futures now reflect expectations of 47 basis points in rate cuts by year-end, up from 44 basis points before the firing rumors.
Earlier in the day, the dollar had gained ground on the euro as investors reassessed the chances of multiple rate cuts this year following stronger-than-expected consumer inflation data for June. While Wednesday’s producer price data came in flat, Tuesday’s CPI report showed the biggest monthly increase in five months—likely influenced by rising prices due to tariffs.
“The dollar reacted positively to the CPI release yesterday,” said Eric Theoret, FX strategist at Scotiabank.
Investors remain focused on tariff policy ahead of the August 1 deadline, when several countries may face higher U.S. levies. Trump said Wednesday the U.S. will likely “stick to the letter” of the deal with Japan and hinted at a potential new trade agreement with India, following Tuesday’s announcement of a deal with Indonesia.
Meanwhile, in Japan, markets are closely watching this weekend’s upper house elections, with concerns over fiscal pressures pushing long-term bond yields to record highs.
In digital assets, bitcoin climbed 2.82% to $119,761, though it remained below Monday’s all-time high of $123,153.
