Trump punches at Powell, dollar recoils

A look at the day ahead in European and global markets

By Ankur Banerjee, Asia Finance & Markets Breaking News Correspondent

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Just as investor sentiment was recovering from the latest geopolitical jolt, buoyed by the Israel-Iran ceasefire, President Donald Trump rattled markets again with an attack on the Fed chair that revived worries over the central bank's independence.

The result has been another bout of dollar selling, which pushed the euro to its strongest level since November 2021 and the Swiss franc to its highest in a decade.

U.S. President Donald Trump arrives in the Rose Garden to announce Jerome Powell as his nominee to become chairman of the U.S. Federal Reserve at the White House in Washington, U.S., November 2, 2017. REUTERS/Carlos Barria

A report from the Wall Street Journal said Trump has toyed with the idea of naming Fed Chair Jerome Powell's replacement as early as September, which could undermine Powell's authority for the remainder of his term to next May.

Trump has repeatedly chastised Powell for not cutting interest rates and said he was "terrible" in the latest attack on Wednesday, eroding investor faith in the U.S. central bank's independence in setting policy.

Earlier this month, Trump openly contemplated firing Powell and even mused about making himself the Fed chair, although he subsequently backed off.

"I know within three or four people who I'm going to pick," Trump told reporters on Wednesday, when asked if he is interviewing candidates to replace Powell.

All that uncertainty, along with Trump's chaotic trade policies and their potential threat to economic growth, have taken a toll on the U.S. dollar as investors look to move their money elsewhere.

The dollar index , which measures the currency against six other units, is down 10% this year and on course for a sixth straight month in the red. The last time it had a run like this was in 2017.

While the "sell America" theme has faded somewhat in the past few weeks, as evidenced by U.S. stocks hitting record highs, investors remain worried about the dollar and how Trump's tariff policies could affect it.

Trump's tariffs are coming back onto the markets' radar as the clock ticks down to his July 9 deadline for trade deals.

In Thursday's Asia trade, futures indicated a muted open for European stock markets. Investors will keep an eye on defence stocks after NATO leaders backed the big increase in defence spending that Trump had demanded.

The big news in the corporate world was Shell denying it was in talks to buy British rival BP, after the Wall Street Journal reported on Wednesday that the oil majors were in early discussions about a takeover.

Graphics are produced by Reuters.

Graphics are produced by Reuters.

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