US President Donald Trump just reintroduced uncertainty into the fate of Federal Reserve Chairman Jerome Powell. His current term is scheduled to expire in May 2026. At an extraordinary press conference in The Hague following the recent NATO summit, Trump rewarded Volker’s leadership by denouncing Powell publicly. He accused Powell of being “terrible” and “a very stupid person.” These comments have stoked the fires of speculation about a Powell replacement before the upcoming appointments.
Yet the economic backdrop has been more tumultuous, to say the least. The only thing left needed for a confirmed quarterly decline in Gross Domestic Product (GDP) for the first quarter of the year is now at -0.5%. This measure, as expected, came in much lower than the advance estimate of -0.2%. Concern over the general state of the economy is increasing. To make the picture even murkier, new claims for unemployment jumped by 236,000 during the week ending June 21.
Just as these comments by Trump and the troubling economic data began bubbling up to the surface, the value of the USD Dollar (USD) plummeted. That news came just days after scuttlebutt broke that Trump was thinking about replacing Powell. Consequently, the dollar was under considerable pressure, leading to a rally in the EUR/USD cross. The euro skyrocketed to a new multi-year high across European trading hours. It topped out at 1.1741 before drifting down to trade a round number lower, just over 1.1700.
The EUR/USD pair has now climbed for six straight days, while the daily chart shows some bullish EUR/USD potential in the days ahead. Analysts point out that an important sentiment change in the market has been driven by traders responding to both Trump’s statements and the horrible economic signals.
In response to questions regarding his views on Powell, Trump stated:
“I mean he goes out pretty soon, fortunately, because I think he’s terrible.” – US President Donald Trump
Speculation is already underway as to who will take his place. Financial market analysts are keenly tracking how this new reality will impact the direction of monetary policy and market dynamics. With Trump’s administration facing economic challenges, the implications of such a leadership change at the Federal Reserve could be profound.
“I think he is a very stupid person, actually.” – US President Donald Trump
Market analysts are already starting to measure the effects of Trump’s rhetorical bomb-throwing on investor confidence, and decisions coming up from the Federal Reserve. As inflation and employment worries keep piling on. This should encourage the administration to act boldly on monetary policy during the first half of 2022.
Market analysts have begun to assess how Trump’s comments may influence investor confidence and future Federal Reserve decisions. The ongoing concerns about inflation and employment may compel the administration to act decisively regarding monetary policy in the coming months.