The U.S. dollar came under heavy selling pressure yesterday following media reports suggesting that Federal Reserve Chair Jerome Powell might be dismissed in the near future.
This unexpected development triggered panic in the financial markets, prompting investors to reassess their risk exposure. Uncertainty surrounding the future leadership of the central bank — especially during times of economic challenges — can seriously undermine confidence in the national currency. Rumors of Powell's dismissal sparked speculation over potential replacements. Experts actively debated which candidate might best handle the current situation and adjust monetary policy to shifting conditions. Potential successors mentioned include both experienced economists with conservative views and those favoring a more liberal stance. The panic-driven flight from the dollar led to a sharp rise in gold prices and other safe-haven assets. Investors, seeking shelter, moved to protect their capital from potential losses caused by currency instability.
However, just a few hours later, demand for the dollar quickly returned. President Donald Trump strongly denied that he was trying to remove Powell from his position, following reports that he had floated the idea during a closed-door meeting with Republican lawmakers. "No, we're not planning anything," Trump told reporters on Wednesday. Later, he added, "I'm not ruling anything out, but I think it's extremely unlikely — unless he has to go because of fraud." What kind of fraud Trump was referring to remains unclear.
Earlier on Wednesday, a White House official who asked to remain anonymous said that Trump was expected to take action against the Fed Chair following his meeting with members of Congress, who visited the White House to discuss cryptocurrency legislation. Several lawmakers reportedly left the meeting with the same impression. Trump later acknowledged that he had conducted an informal poll of attendees regarding Powell's potential dismissal.
It's worth noting that Trump and his allies have repeatedly criticized Powell for the Fed's decision to keep interest rates unchanged. The U.S. President has frequently raised the issue of firing the Fed Chair over monetary policy disagreements, though no formal steps have been taken so far.
If Trump does attempt to remove Powell, it would unsettle financial markets and trigger a major legal battle over the central bank's independence. Such a move would be unprecedented in modern U.S. history and could erode trust in the country as a stable economic partner. Fearing political interference in monetary policy, investors would likely withdraw capital, causing a sharp drop in the dollar's value and a rise in bond yields. The prospect of a prolonged legal showdown only adds to the uncertainty. A dispute over presidential authority to remove the Fed Chair could set a dangerous precedent, casting doubt on the central bank's independence from political pressure. This issue could have serious implications for the long-term stability of the U.S. economy.
Moreover, removing Powell could trigger a recession. A sudden change in the Fed's leadership during a period of economic uncertainty would introduce additional risks and hinder timely, effective measures to stimulate growth. Ultimately, attempts to weaken the Fed's influence could backfire, causing serious damage to the U.S. economy.
Current Technical Outlook for EUR/USD
Buyers need to focus on reclaiming the 1.1655 level. Only then can they target a test of 1.1690. From there, the pair might advance to 1.1720, though reaching this level without support from major players would be quite difficult. The most ambitious target remains the 1.1770 high. In the event of a decline, significant buying interest is expected only near 1.1590. If no support appears there, it would be reasonable to wait for a retest of the 1.1550 low or consider long positions from 1.1495.
Current Technical Outlook for GBP/USD
Pound buyers need to break through the nearest resistance at 1.3420. Only then can they target 1.3464 — a level that may prove difficult to breach. The furthest upward target is the 1.3500 zone. In the event of a decline, bears will try to regain control at 1.3375. If successful, a break below this range would deliver a significant blow to the bulls and push GBP/USD toward the 1.3335 low, with potential for a move down to 1.3290.
