SYDNEY: The dollar slipped to multi-year lows against the euro and Swiss franc on Thursday as concerns about the future independence of the U.S. Federal Reserve undermined faith in the soundness of the country’s monetary policy.
According to a Wall Street Journal report, U.S. President Donald Trump had toyed with the idea of selecting and announcing Federal Reserve Chair Jerome Powell’s replacement by September or October, aiming to undermine his position.
“Markets are likely to bristle at any early move to name Powell’s successor, particularly if the decision appears politically motivated,” said Kieran Williams, head of Asia FX at InTouch Capital Markets.
“The move would raise questions about the potential erosion of Fed independence and potentially weaken credibility,” he added. “If this was the case it could recalibrate rate expectations, trigger reassessment of dollar positioning.”
Trump on Wednesday called Powell “terrible” for not lowering interest rates sharply, while the Fed Chair was telling the Senate that policy had to be cautious as the President’s tariff plans were a risk to inflation.
Markets have nudged up the chance of a rate cut at the Fed’s next meeting in July to 25%, from just 12% a week ago, and are pricing in 64 basis points of cuts by year-end, up from around 46 basis points last Friday.
“While this stands to be the latest hammer blow to the dollar delivered by the hands of the White House, I do expect it to gain some support in the coming sessions from month-end and quarter-end rebalancing flows,” said Tony Sycamore, an analyst at IG.
NOT SO EXCEPTIONAL
For now, though, the dollar was under broad pressure as the euro gained 0.4% to $1.1710 , its highest since September 2021. The break of resistance at $1.1692 opened the way to the next chart target up at $1.1909.
Sterling rose 0.3% to $1.3723, its highest since January 2022, while the dollar was at its lowest in more than a decade on the Swiss franc at 0.8030 . The franc also struck a record peak on the yen around 180.55 .
U.S. stocks took a breather on Wednesday, with the Dow dipping a quarter-percent, the S&P 500 ending flat and the Nasdaq ticking up about a third of a percent.
