President Trump\u2019s firing of Fed Governor Lisa Cook and the broad view that this marks further politicisation of the Fed are negative for the dollar. Yet, the FX reaction has been muted and may only play out in the longer run, likely for two reasons. First, Cook is challenging the decision, which will probably end up in court. Second, her departure won\u2019t have a big impact on the next few meetings. With Powell still in charge, markets expect policy to remain data-driven, and the dovish dissent remains too small to push for faster or larger cuts.<\/p>\n
The real consequences of FOMC politicisation are likely to appear post-Powell \u2013 after May 2026 \u2013 assuming Trump doesn\u2019t remove him earlier. By then, a new chair with dovish leanings would need committee support to move on cuts, but that\u2019s too far out for markets to price in. Also, the new chair\u2019s easing scope will be limited if Powell lowers rates by 100bp to around 3.5% by then, as markets expect.<\/p>\n
The most visible market impact so far has been the underperformance of 30-year Treasuries. But long-dated Treasury selloffs are more likely to weigh on the dollar when driven by fiscal concerns rather than inflation. With front-end yields fairly stable, it\u2019s no surprise the dollar is holding ground.<\/p>\n
It\u2019s reasonable to expect headlines on Cook\u2019s firing to lose impact over time, as has happened with similar episodes since Trump took office. Trump\u2019s unpredictability on many fronts \u2013 including Fed relations \u2013 has made markets increasingly reluctant to stray from the narrative set by data and official communication. Reports this morning that the White House is seeking more influence over regional Fed president picks had little effect.<\/p>\n
We expect the dollar to stabilise after solid data yesterday \u2013 consumer confidence and durable goods orders beat consensus \u2013 and given today\u2019s light calendar. The week\u2019s focus will shift to GDP revisions and July\u2019s core PCE on Thursday and Friday.<\/p>\n
Francesco Pesole<\/p>\n","protected":false},"excerpt":{"rendered":"President Trump\u2019s firing of Fed Governor Lisa Cook and the broad view that this marks further politicisation of…\n","protected":false},"author":2,"featured_media":96556,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[84,467,56,54,55],"class_list":["post-96555","post","type-post","status-publish","format-standard","has-post-thumbnail","category-markets","tag-business","tag-markets","tag-uk","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/96555","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=96555"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/96555\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/96556"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=96555"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=96555"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=96555"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}