The US dollar is under pressure as markets await Trump's choice to head the Federal Reserve
US Dollar Index (DXY)
The US dollar witnessed a significant decline for the fourth consecutive session, reaching its lowest levels in three years at the level of approximately 97.35 and a candidate for further decline, influenced by multiple factors, most notably growing concerns about the independence of the US central bank, along with disappointing economic data.
Factors of pressure on the dollar
A series of weak economic reports contributed to strengthening the downward trend, as the US Consumer Confidence Index showed a decline, and housing sector data also came in below expectations, adding to investor pessimism.
However, the most influential factor was reports indicating the possible interference of former US President Donald Trump in the affairs of the Federal Reserve.
Federal independence concerns
According to the Wall Street Journal, Trump is considering announcing early his candidate to succeed the current Fed Chairman Jerome Powell, whose term ends in 11 months and specifically in May 2026.
The reason is due to Trump's dissatisfaction with Powell's cautious policy of lowering interest rates, as the former president prefers to adopt a more flexible monetary policy to support economic growth.
The Fed presidential candidate is usually announced 3-4 months before the end of the term, but an early nomination may be interpreted as an attempt to influence the direction of the central bank, threatening its independence, which is a key pillar of market confidence.
Analysts fear that this will change expectations about the course of interest rates, especially if a candidate is chosen who is inclined to adopt an expansionary monetary policy.
Possible future effects
The decline of the dollar remains closely related to the developments of this file, especially with the approach of the US elections.
If Trump moves towards appointing a president more in line with his directions, the Fed may lose some of its credibility, which may increase market volatility and weaken the dollar in the medium term.
In turn, any signals confirming the preservation of the independence of the central bank may support the US currency again.
