Renewed concerns around the Trump administration’s attacks on the Fed’s independence have meant that while the US dollar is a touch stronger over the week as a whole, it is ending the week on the backfoot. Even if the president swiftly denied reports that he is considering firing Chair Powell imminently, Wednesday’s episode illustrates the threat that the president’s insistence on lower interest rates and more control over the Fed poses to the dollar (and US asset markets). Our base case remains that solid US data and a tariff-driven rebound in inflation will keep the FOMC on hold into 2026, and that the resulting shift in interest rate differentials will drive a continued rebound in the dollar in the next few months. But that view is clearly at the mercy of the White House’s whims.
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