'The Dollar Would Fall Off a Cliff': Expert Predicts What Would Happen if Trump Fired Jerome Powell
Trump has criticised Powell for not lowering interest rates despite declining oil prices and easing inflation concerns. In a recent Truth Social post, he said Powell is 'always too late and wrong, and his termination cannot come fast enough.'
On Monday, the ICE US Dollar Index, which compares the dollar against six other currencies, dropped over 1% to a three-year low of 98.02. Elsewhere, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite nosedived by over 2% each in a single trading session, reflecting a full-blown selloff in US assets.
Furthermore, the 30-year Treasury bond yield jumped to a three-month high of roughly 4.91% amid the selloff of long-dated US government debt. Market experts are now trying to determine the economic impact of Powell's potential departure before his term ends in May 2026.
'Were Powell to be fired, the initial reaction would be a huge injection of volatility into financial markets, and the most dramatic rush to the exit from US assets that it is possible to imagine,' according to a note from Michael Brown of Pepperstone.
'Lower, much lower, equities; Treasuries sold across the board; and, the dollar falling off a cliff,' Brown said. He added that any threat to the Fed's independence would lead to investors from around the world selling US-based assets they hold and increase the odds of 'upending the entire way in which the global financial system operates.'
'If this were to happen, then the reserve status of the dollar, and haven value of Treasuries, would be wiped out, probably forever in both cases,' he cautioned investors. Global Banks Downgrade Outlook on US Assets
Investment banks, including Goldman Sachs, are downgrading their outlook on US assets. Kamakshya Trivedi, head of global FX, rates, and EM strategy at Goldman Sachs, said the firm reversed its bullish dollar outlook several weeks ago due to heightened economic policy risks.
'We flipped our Dollar view a few weeks ago, based in large part on tariffs and other US policy shifts raising uncertainty and impairing sentiment in the US,' Trivedi said. 'We expect that shift will lead to less exceptional outcomes for US assets.'
US Commodity Futures Trading Commission data from late last week revealed consistent outflows from dollar positions and rising bearish trades being placed by hedge funds.
BBVA strategist Alejandro Cuadrado said yesterday that global markets and the US dollar could be severely affected if Powell departs from the Fed. 'Independence and credibility are key assets for the Fed and the US. If investors fear the US administration will control the central bank, the impact on confidence would be unprecedented,' he said.
Meanwhile, Scotiabank's strategist Shaun Osborne said inflation stability is historically linked to central bank independence. 'Political interference in Fed policymaking would erode confidence in the USD and may bolster inflation in the longer run,' Osborne said.
Originally published on IBTimes UK
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Int'l Business Times
40 minutes ago
- Int'l Business Times
Trump Unveils Investments To Power AI Boom
US President Donald Trump went to Pennsylvania on Tuesday to announce $92 billion in energy and infrastructure deals intended to meet big tech's soaring demand for electricity to fuel the AI boom. Trump made the announcement at the inaugural Pennsylvania Energy and Innovation Summit at Carnegie Mellon University, with much of the talk about beating China in the global AI race. "Today's commitments are ensuring that the future is going to be designed, built and made right here in Pennsylvania and right here in Pittsburgh, and I have to say, right here in the United States of America," Trump said at the event. The tech world has fully embraced generative AI as the next wave of technology, but fears are growing that its massive electricity needs cannot be met by current infrastructure, particularly in the United States. Generative AI requires enormous computing power, mainly to run the energy-hungry processors from Nvidia, the California-based company that has become the world's most valuable company by market capitalization. Officials expect that by 2028, tech companies will need as much as five gigawatts of power for AI -- enough electricity to power roughly five million homes. Top executives from Palantir, Anthropic, Exxon and Chevron attended the event. The funding will cover new data centers, power generation, grid infrastructure, AI training, and apprenticeship programs. Among investments, Google committed $25 billion to build AI-ready data centers in Pennsylvania and surrounding regions. "We support President Trump's clear and urgent direction that our nation invest in AI... so that America can continue to lead in AI," said Ruth Porat, Google's president and chief investment officer. The search engine giant also announced a partnership with Brookfield Asset Management to modernize two hydropower facilities in Pennsylvania, representing 670 MW of capacity on the regional grid. Investment group Blackstone pledged more than $25 billion to fund new data centers and energy infrastructure. US Senator David McCormick, from Pennsylvania, said the investments "are of enormous consequence to Pennsylvania, but they are also crucial to the future of the nation." His comments reflect the growing sentiment in Washington that the United States must not lose ground to China in the race to develop AI. "We are way ahead of China and the plants are starting up, the construction is starting up," Trump said. The US president launched the "Stargate" project in January, aimed at investing up to $500 billion in US AI infrastructure -- primarily in response to growing competition with China. Japanese tech investor SoftBank, ChatGPT-maker OpenAI, and Oracle are investing $100 billion in the initial phase. Trump has also reversed many policies adopted by the previous Biden administration that imposed checks on developing powerful AI algorithms and limits on exports of advanced technology to certain allied countries. He is expected to outline his own blueprint for AI advancement later this month. Top executives from Palantir, Anthropic, Exxon and Chevron attended the event AFP
DW
3 hours ago
- DW
EU backs Trump Ukraine U-Turn but wants US to 'share burden' – DW – 07/15/2025
The European bloc welcomed a shift in US rhetoric on Ukraine but pressed Washington to chip in. The EU, however, failed to agree on a new round of sanctions on Russia. The European Union's foreign affairs chief may be having something of an "I told you so" moment as US President Donald Trump reverses his past praise of Vladimir Putin and vows to ramp up pressure on Moscow. "We see from the United States that they have also realized that Russia does not really want peace," Kaja Kallas told reporters in Brussels on Tuesday. The former Estonian prime minister made a name for herself as one of Ukraine's staunchest political backers, and warned at this week's EU talks that Russia's bombing campaign had "reached record levels." Kallas and many of her EU counterparts welcomed Washington's shift in rhetoric as they filed into a meeting. "What we experienced yesterday with the new messages from Trump was very, very important," Denmark's Lars Lokke Rasmussen said. But some of the EU's top brass also had notes for the US on its latest announcements, including Washington's threat to slap 100% secondary tariffs on Russia and countries that trade with it unless a peace deal with Ukraine is reached by early September. "The 50 days that Mr. Trump has announced is rather long," Dutch foreign minister Caspar Veldkamp said on the sidelines of Tuesday's talks. To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Trump also made headlines Monday with an announcement that he'd be greenlighting sales of Patriot air defense systems and other arms to European countries to send on to Ukraine, just two weeks after Washington paused some arms shipments to Kyiv. The new plan should speed up and expand deliveries of US arms which Ukraine says it needs as it faces increased Russian aerial attacks. Some European countries have already been buying and sending US-made weapons to Kyiv, though the latest scheme could offer more certainty on the permissions needed to swiftly transfer the arms. A US commitment to sell replacements for American-made weapons sent to Ukraine could also encourage European states to ship more of their own military supplies. NATO chief Mark Rutte said the deal would "work through NATO systems" and that European countries including Germany, Finland, Denmark, Sweden and the Netherlands were all interested in taking part. But the US is yet to disclose more details of its new scheme and DW understands the technicalities of exactly how it will work are still being discussed. Trump was, however, quick to cast the new deal as a lucrative business opportunity for the US, stressing Europe would foot the bill. And that seems to be raising some eyebrows among his counterparts across the Atlantic. The EU's Kallas told reporters after Tuesday's meeting that she would like to see Europe and the US "share the burden" of arming Ukraine. "If we pay for these weapons, it's our support — so it's European support — and we are doing as much as we can to help Ukraine. And therefore the call is that everybody would do the same," she said. "If you promise to give the weapons then say that somebody else is going to pay for it, it's not really given by you, is it?" Kallas added. Denmark's Rasmussen made a similarly veiled allusion. "We are providing a lot of funding for Ukraine to buy whatever weapons and ammunition they need … But I mean, I would very much like to see all our partners actually also contributing if we want this war to stop," he said. While the US ranks as Ukraine's single largest donor since its full-scale invasion by Russia, the European Union as a whole has spent roughly the same amount as Washington over the same period, according to data from the Kiel Institute cited by Radio Free Europe. The EU outspends the US when the cost of hosting and assisting Ukrainian refugees is factored in. EU states may be breathing a sigh of relief after the US policy shift, but policy analyst Torrey Taussig says it's too soon to judge whether Trump's stance has changed for good. "There has been a seesaw approach to this relationship throughout the last several months of this administration, and I wouldn't be surprised if this relationship, the US-Ukrainian relationship, still has more turns that it can take," the former US government official turned Atlantic Council fellow told DW. "I'm very reluctant to call this a strategic shift in the US-Ukrainian relationship," she added, though added that the two sides' ties now seem far more "positive." To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video With European countries racing to boost their own defenses amid pressure from the US and a broader rethink of the EU's geopolitical fragility, governments have been debating how much of a planned military spending splurge should go to US weapons. Arms purchases, especially those involving large weapons systems, tend to lock the buyer into a years-long relationship with the seller, from production to delivery to future repairs. Experts say ending Europe's dependency on the American-made weapons, logistics and intelligence capacities it lacks could take at least a decade — and with US foreign policy proving unpredictable, that leaves some worried. EU heavyweight France has pushed for more European-only purchases, frustrating some other states which argued this only serves to slow down the process of getting weapons into European and Ukrainian hands. The latest US-led plan may be seen by some as a blow to France's efforts, with the potential for more European money to flow toward US arms manufacturers. As Europe nudges the US to do more to support Ukraine and punish Russia, the bloc's own efforts are faltering. Kallas said she was "really sad" that ministers failed to adopt an 18th round of EU sanctions on Moscow on Tuesday due to a holdout by Slovakia. The landlocked central European state has been protesting planned EU laws to ban all sales of Russian gas, and Prime Minister Roberto Fico said in an online post on Tuesday that Slovakia had asked the EU to postpone the vote on sanctions while his government mulled its response to an exchange with the EU's executive aimed at ending the stalemate. Kallas said she was "optimistic" an agreement could be struck among EU states in the coming days.
Int'l Business Times
4 hours ago
- Int'l Business Times
Trump Admin to Destroy Enough Emergency Food to Feed Every Child in Gaza for a Week Due to DOGE Dismantling USAID
The Trump administration is set to destroy enough emergency food to feed every child in Gaza for a week due to the Department of Government Efficiency's (DOGE) dismantling of USAID. Several hundred metric tons of emergency food, including high-energy biscuits intended for children under 5, are set to expire in a matter of days after being held for months without being distributed, two sources told The Atlantic . After DOGE dismantled USAID earlier this year, the agency was taken over by the State Department. Under new leadership, any food, money or aid needed direct approval to be handed out. Multiple sources told the outlet that they asked for approval to move the food, but never heard back from officials. An order to destroy the food was sent out in May, just before Secretary of State Marco Rubio told members of Congress that he would see to it that the food gets delivered. An estimated 1.5 million hungry children could have been fed by the nearly 500 metric tons of food for a week, leading critics to review who could have received the much-needed food, such as famine-facing countries like Sudan. In Gaza, about 500,000 people are currently facing starvation, according to the United Nations . A Food Security Phase Classification report from May stated that 71,000 children under the age of 5 are facing acute malnutrition. Hundreds of Palestinians have been killed over the last six weeks while trying to obtain humanitarian aid at aid distribution centers in Gaza, according to the UN. Israeli forces killed at least 31 people on Saturday alone while attempting to access aid from a US-backed food distribution site. The food aid had originally been intended for Afghanistan and Pakistan, however the State Department ended aid to Afghanistan and Yemen over concerns that it would fall into the hands of terrorists, NPR reported in April. Worries about accidentally aiding terrorists were not included in the reason for ending Pakistan's aid. Originally published on Latin Times
