Trump, Pressure on Chairman Powell to resign…Weak Dollar · Gold Price Rise Shakes Financial Market

Austan Goolsbee Chicago Fed President (Source: Reuters)

Donald Trump, the American president, is publicly pressuring Jerome Powell, the Federal Reserve (Fed) chairman, to resign, causing the financial markets to react sensitively. The value of the dollar has plummeted, US stock futures and bond prices have shown a downward trend, and gold has reached an all-time high.

According to Bloomberg News on the 21st (local time), after Powell's resignation pressure remarks, the Bloomberg Dollar Spot Index fell to its lowest point since January last year. Although trading volume was thin due to the holiday, the dollar continued its weak trend for the third consecutive week, while the euro and yen each rose to their highest levels in 3 years and 7 months. At the same time, US bond prices fell, and gold prices rose, showing a pronounced preference for safe assets.

President Trump targeted Powell, who criticized his tariff policy, on the 17th, saying, "If I want his resignation, he will step down very quickly," repeatedly urging for a rate cut. He escalated the resignation pressure by writing on SNS, "Powell's term should end quickly."

Kevin Hassett, White House National Economic Council chairman, further fueled the controversy by answering the question about Powell's potential dismissal, saying, "The president and his team are reviewing the issue." Consequently, hedge funds and others began selling off the dollar, and the dollar's weakness deepened further.

Within the financial market, concerns are spreading about the erosion of the Fed's independence. OCBC bank's Christopher Wong strategist warned that "if questions arise about the Fed's credibility, trust in the dollar could crumble," while Brown Brothers Harriman's Win Thin, head of strategy, emphasized that "the attacks on Fed independence must be taken seriously."

FHN Financial's Will Compernoll strategist also expressed concerns, stating that "once central bank independence is compromised, recovery is difficult. Pressure on Powell adversely affects foreign confidence in US assets."

There is also analysis suggesting that this turmoil could work in favor of Chairman Powell. Maxmilian Lin, strategist at the Canadian Imperial Bank of Commerce, said, "If the market can exercise restraint despite Trump's pressure, it could be a positive signal for Chairman Powell's position."

On this day, US stock futures fell up to 1%, and the 10-year US Treasury yield rose by 2bp. Gold recorded an all-time high, and European bonds showed an uptrend due to the weak dollar. Typically, with a strong euro, German bond prices fall, but lately, existing correlations are being shaken due to tariff policies, etc.

Chicago Fed President Austan Goolsbee publicly opposed Trump's resignation pressure in a CBS broadcast interview, stating that "almost unanimously, economists agree that monetary policy should operate independently without political interference." He warned that "if the independence of the central bank is weakened, there could simultaneously be a rise in inflation, a slowdown in growth, and worsening employment."

Despite Trump's pressure, Powell has made it clear that he has no intention of leaving before his term expires next May. While the US law does not grant the president the authority to dismiss the Fed chairman over policy disagreements, the lack of related precedents leaves room for interpretation, causing anxiety in the market.