Dollar Struggles as Trump’s Criticism of Fed Stokes Market Uncertainty

The U.S. dollar remained under pressure Thursday after falling overnight amid reports President Donald Trump might fire Federal Reserve Chair Jerome Powell. Although Trump denied the rumors, he left the possibility open and continued criticizing Powell for not cutting interest rates, suggesting they should be at 1% or lower.

Investors fear that removing Powell before his term ends in May 2026 could damage the Federal Reserve’s independence and hurt the dollar’s status as a safe-haven currency. A more dovish Fed could also spark inflation and lead to negative real yields on U.S. Treasuries, warned Mahjabeen Zaman, head of FX research at ANZ, who noted that such a move would likely increase volatility in global markets.

Bloomberg reported Trump might soon dismiss Powell, with Reuters confirming that some Republican lawmakers responded favorably when polled on the idea. Trump later told reporters, “I don’t rule out anything,” though added it’s unlikely unless Powell was involved in fraud—a nod to GOP criticism over cost overruns in the Fed’s $2.5 billion headquarters renovation.

The dollar index was flat at 98.384 after sliding 0.3% Wednesday. The greenback inched up 0.2% to 148.14 yen, recovering from a 0.6% drop, while the euro traded at $1.1632 and the British pound edged lower to $1.3409.

Investors are also closely watching trade developments, with Trump hinting at a new trade deal with India after agreements with Japan and Indonesia. Meanwhile, Japan faces political uncertainty ahead of upper house elections, pressuring long-term yields to record highs.

Market volatility is likely to persist as geopolitical tensions and central bank credibility remain in focus for global investors and forex markets.