The dollar has fallen amid increased interest -cuts in the United States, driven by the growing expectation that Federal Reserve President (Fed) can adopt a milder monetary policy before the market provided for.
Bloomberg’s index that measures the performance of the dollar against other currencies reached the lowest level in three years, after the Wall Street Journal Inform that President Donald Trump may announce Jerome Powell’s replacement by September or October. For investors, the news is a sign that early interest cuts become more likely, as Trump has repeatedly pressing Powell to reduce loan costs.
“Trump’s appointment will increase pressure, to the point of having a shadow president of the Fed even before Powell left office next year,” said Rodrigo Catil, a strategist of the National Australia Bank in Sydney. “We think it is fair to say that the pressure on Powell to cut interest will increase – and this is contributing to the sale of the dollar.”
The latest Powell headlines add another risk element to the dollar and US Treasury titles, which already face pressures due to uncertainties around tariffs impacts and fiscal deficit growth.
Bloomberg’s dollar index fell up to 0.2%, reaching the lowest level since April 2022. In the year’s accumulated, the index has dropped more than 8%. In recent days, operators have strengthened their bets on Fed’s interest cuts later this year and are now pricing 66 loosening points by December-against 51 base points at the end of last week, according to overnight indexed swaps data.
“This is clearly weighing on the dollar more broadly,” said Ignatius Pang, head of sales and exchange rate for Asia at Union Bancaire Privée. Episodes of strength of the US dollar, he said, are “opportunities to seek diversification in dollar reserves.”
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Powell’s possible substitutes include former Fed Kevin Warsh director and national economic council director Kevin Hassett, according to the Wall Street Journalwhich cited sources familiar with the subject.
What Bloomberg’s strategists say…
“Investors will interpret Trump’s possibility to appoint a new Fed president by October as a sign that early interest cuts are more likely. The market is already pricing a cut in September, but this turnaround increases July’s chances to be taken seriously to a 25-base cut.”
– Mark Cranfield, Markets Live strategist
Trump said on Wednesday that he has three or four names in mind to succeed Powell, whose mandate runs until May 2026. He has criticized the Fed’s decision to keep interest rates, defending cuts and claiming that the Central Bank is keeping the US government financing costs high.
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“This, in practice, weakens Powell’s influence as everyone focuses on the future president,” said Matthew Haupt, Wilson Asset Management manager in Sydney. “That is, there is a more dovish inclination (favorable to low interest rates).”
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