Lock the White House Watch Newsletter for free
Your Guide to What Trump’s Second Season Means Washington, Business and World
The dollar weakened to its three-year low on Thursday after reports that Donald Trump was considering early nomination of the next Federal Reserve Chairman due to his grievances at a slow pace of interest rate cuts.
The US currency fell 0.6% against a basket of trading partners, including the pound and euro, reaching its last level in early 2022.
This year, the dollar has skated this year about concerns about the US economy from Trump’s trade war and broader economic policies. The latest move is that after a report by the Wall Street Journal, the US president was considering announcing his choice to take over Jay Powell earlier than expected. Powell’s term of office expires in May 2026.
“Candidates who are perceived as more open to lowering rates in line with President Trump’s demands will strengthen the current weakening trend of the US dollar,” said Lee Hardman, senior currency analyst at MUFG.
The euro increased its 0.7% against the dollar to $1.174 after European NATO allies pledged on Wednesday to raise their defensive spending to 5% of GDP by 2035.
“The possibility of an early Fed chair announcement is one of the factors driving the dollar today,” said Richard Yethisenga, ANZ’s chief economist and head of research.
“On the European side, confirmations on the increase in fiscal spending, in this case, on defense, are also giving the euro a boost,” he added.
Some content could not be loaded. Please check your internet connection or browser settings.
This year, the dollar fell more than 10% due to concerns over the Fed’s independence as warnings about the sustainability of the hits predicted from the trade war and US debt pile mix.
“The broader background is the perception that the US economy is slowing faster than in other parts of the world, which contributes to the allocation of investors from the US,” Yetsenga says.
Kelvin Lau, a senior economist in China and Asia who was standard chartered, said the possibility of an early nomination for the next Fed chair is squeezing the dollar, believing in interest rate cuts that “the Fed can shift early.”
Recommended
Powell opposed Trump’s call for immediate cuts in interest rates.
“We are committed to providing a range of services to our customers,” said Mithul Koteka, head of Barclays’ emerging market macro strategies. “It’s now a Shadow Fed environment, which is one of the biggest fears about the impact on the Fed’s reliability.”
The US Treasury Department is stable, with rate-sensitive two-year yields falling 0.01 percentage points to 3.76%.
European stocks recorded conservative earnings, with the European Stoxx 600 index rising 0.2%, while futures tracking the US Blue Chip S&P 500 increased 0.3%.
