Trump’s Fed Remarks Shake Markets, Dollar Hits Multi-Year Low

Asian stock markets wavered on Thursday while the U.S. dollar slipped to a multi-year low, as fresh concerns emerged over the independence of the Federal Reserve following comments from former President Donald Trump.

Reports suggest Trump is considering announcing a replacement for Federal Reserve Chair Jerome Powell as early as September or October, despite Powell’s term running until May 2026. Analysts warn that such an early announcement could create a “shadow chair” situation, undermining the central bank’s credibility and affecting global financial confidence.

The U.S. dollar index fell to its lowest level since March 2022, extending a year-to-date decline of 10%. As investors reassess the stability of U.S. monetary policy, demand for safer currencies rose. The euro surged to its strongest point since September 2021, the Swiss franc reached a 10-year high, and the Japanese yen appreciated 0.3% to 144.815 per dollar.

Meanwhile, MSCI’s broad index of Asia-Pacific shares outside Japan edged higher. Tokyo’s Nikkei gained 1.5%, hitting its highest level since late January. However, global sentiment remained mixed, with traders wary of Trump’s July 9 deadline to impose fresh tariffs on trading partners.

Trump has frequently criticized Powell for not cutting rates aggressively and has floated the idea of replacing him with a more dovish candidate who aligns with his economic agenda. Market experts warn this could erode the Fed’s perceived independence and damage investor trust in U.S. assets.

“The Fed’s independence is vital for policy credibility,” said one analyst. “Any political interference will be closely watched.”

Adding to the uncertainty, Powell addressed Congress on Wednesday, saying new tariffs could cause a one-time price jump but may also lead to sustained inflation. He urged caution on future rate decisions.

Market expectations of a rate cut in July jumped to nearly 25%, up from 12.5% a week earlier, according to CME’s FedWatch tool. The U.S. two-year Treasury yield dropped 1.5 basis points to 3.764%, its lowest in seven weeks.

Elsewhere, oil prices rebounded slightly. Brent crude futures rose 0.37% to $67.93 a barrel, and U.S. WTI gained 0.45% to $65.21. A holding ceasefire between Israel and Iran helped calm recent commodity volatility.

As investors await Friday’s PCE inflation data, markets remain on edge, caught between political tensions, trade uncertainty, and questions about the future of U.S. monetary policy.