empty
22.04.2025 01:07 AM
The Dollar Meant Well. But Things Went as Usual

Be careful what you wish for. Donald Trump's desire to make America great again and return to a golden age is backfiring by eroding trust in U.S. assets, capital flight, and a weakening dollar. The USD Index has fallen to its lowest levels since September, while the EUR/USD rally has accelerated amid the White House's criticism of Jerome Powell.

Can the U.S. President fire the Fed Chair he appointed? Formally, no, but the law does mention removal "for cause." In 2021, Powell and his colleagues viewed inflation as transitory, waited too long to raise rates, and, as a result, prices surged even further. The response to accelerating inflation was delayed, so Trump arguably has grounds to criticize the Fed chief. But this time, the story is different.

Average Interest Rate Dynamics in Developed Countries

This image is no longer relevant

According to Bloomberg, central banks in developed nations are expected to lower borrowing costs by an average of 50 basis points by the end of 2025 to counteract the negative effects of trade wars. However, the theory says that the country imposing tariffs faces high inflation; the one facing those tariffs faces an economic slowdown. Other central banks have justification to ease monetary policy. The Fed does not. Powell is doing everything right, but the White House has other plans.

Monetary expansion could act as a lifeline for U.S. stock indices but would also further accelerate inflation, especially since tariffs are not the only factor fueling price growth. One of the key drivers of U.S. GDP growth in 2023–2024 was population increase, particularly due to immigration. If the economy loses 5.5 million semi-legal workers, it will lose momentum, while wages, on the contrary, will accelerate.

U.S. Dollar Performance

This image is no longer relevant

This outlines a stagflation scenario: the labor market is cooling, but prices are rising rapidly. This ties the Fed's hands, which operates under a dual mandate—controlling inflation and maintaining employment. The economy is suffering, and with it, the dollar. It's no surprise that speculators are dumping dollars, and Deutsche Bank now calls German and Japanese bonds a better safe-haven alternative to U.S. Treasuries.

This image is no longer relevant

According to French Finance Minister Eric Lombard, firing Powell would undermine trust in the U.S. dollar and destabilize the American economy. These processes are already well underway, but a loss of Fed independence would be the catalyst for a EUR/USD rally.

Technically, the daily chart of the main currency pair shows a recovery in the uptrend. Theoretically, the pair's return below 1.148 could trigger a reversal pattern like Anti-Turtles. But until that happens, bulls remain in control. It makes sense to hold and add to existing long positions in EUR/USD with targets at 1.16 and 1.12.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

US Dollar: Weekly Preview

Once again, the dollar will be in the spotlight this week, not only because of the Federal Reserve meeting but also due to political developments in the United States

Chin Zhao 00:38 2025-06-16 UTC+2

British Pound: Weekly Preview

The UK will have at least one report that deserves attention. On Wednesday, the May inflation report will be released. According to market expectations, inflation will slow to 3.4% year-over-year

Chin Zhao 00:38 2025-06-16 UTC+2

Euro Currency: Weekly Preview

The European currency continues to benefit from the weakness of the U.S. dollar, which became fully apparent after Donald Trump returned to the scene. Honestly, discussing how Trump—or the events

Chin Zhao 00:38 2025-06-16 UTC+2

USD/CAD. Analysis and Forecast

The USD/CAD pair is showing a modest recovery from levels below 1.3600, retracing most of the previous day's losses, supported by a rebound in the U.S. dollar. In addition, concerns

Irina Yanina 13:09 2025-06-13 UTC+2

AUD/JPY. Analysis and Forecast

The AUD/JPY pair has been under selling pressure for the third consecutive day, reaching an almost two-week low around 92.30 during Friday's Asian session. After a sharp drop, spot prices

Irina Yanina 12:53 2025-06-13 UTC+2

Israeli Missile Strike on Iran Will Crash Global Markets (I Expect Bitcoin and #NDX to Resume Their Decline After a Local Upward Correction)

As I anticipated, the lack of a broad positive outcome in negotiations between China and the U.S. and renewed inflationary pressure led to a sharp decline in demand for corporate

Pati Gani 10:10 2025-06-13 UTC+2

Greed Will Do the Market No Good

The less you know, the better you sleep. Encouraged by a 21% rally in the S&P 500 from its April lows, the crowd continues to buy the dip—completely unbothered

Marek Petkovich 09:35 2025-06-13 UTC+2

What to Pay Attention to on June 13? A Breakdown of Fundamental Events for Beginners

Several macroeconomic reports are scheduled for Friday, but we doubt that the data will significantly impact traders today—especially today. As a reminder, Donald Trump intends to raise tariffs

Paolo Greco 07:16 2025-06-13 UTC+2

GBP/USD Overview – June 13: The Court Won't Stop Donald Trump!

The GBP/USD currency pair continued its upward movement on Thursday and nearly updated its three-year high. For most of the day, quotes hovered around the 1.36 level

Paolo Greco 03:41 2025-06-13 UTC+2

EUR/USD Overview – June 13: America's Economy Gets Lucky

The EUR/USD currency pair continued its strong upward movement throughout Thursday. Is anyone still puzzled as to why the U.S. dollar keeps falling? From our point of view, the reasons

Paolo Greco 03:41 2025-06-13 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.