empty
22.04.2025 11:12 AM
Why the U.S. Dollar Keeps Falling

The U.S. dollar fell to its lowest level since January 2024 after President Donald Trump's criticism of the Federal Reserve sparked concerns over the central bank's independence.

The dollar weakened against all major currencies after National Economic Council Director Kevin Hassett stated that Trump is considering the dismissal of Fed Chair Jerome Powell. These comments prompted a wave of dollar selling on Monday. Gold, which typically moves inversely to the U.S. currency, surged to a record high.

This image is no longer relevant

It's clear that Trump, frustrated by the Fed's reluctance to cut interest rates, stated last week that Powell's dismissal could happen rather quickly. Criticism of the Fed not only undermines the principle of central bank independence but also risks politicizing U.S. monetary policy in ways that markets could find deeply unsettling. However, similar tensions occurred during Trump's first term, and at the time, things ended relatively peacefully.

Firing Powell would be a major shock to the markets and the U.S. economy, so Trump's words are unlikely to be taken literally. Still, if the Fed's credibility is seriously called into question, it could significantly undermine trust in the dollar. Markets could begin to demand a premium for political risk on dollar-denominated assets—especially if this story gains traction in the coming days and weeks.

The decline in U.S. assets suggests that the once-popular "America First" trading strategy is gradually fading. That strategy was based on buying assets that benefit when the U.S. faces challenges, expecting a strong stimulus response from the Fed. But the landscape has changed: after Trump raised global tariffs, spooking the Treasury market and erasing trillions from global equity valuations, the dollar itself came under pressure. Among currencies, the euro and Swiss franc have led the gains—the euro, in particular, has climbed to a three-year high.

The dollar's decline isn't only about the Fed; it's also about diversification in the face of an escalating trade war. Asian countries hold many dollar-denominated deposits due to favorable interest rates, and capital inflows into those markets could increase further.

Yesterday, Chicago Fed President Austan Goolsbee warned against efforts to undermine the central bank's independence. "There is near-universal consensus among economists that monetary independence from political interference is necessary—for the Fed or any central bank to do its job," Goolsbee said. French Finance Minister Eric Lombard also warned that Trump would risk damaging trust in the dollar and destabilizing the U.S. economy if he removed Powell.

Technical Outlook

EUR/USD: Buyers now need to push through the 1.1570 level. Only a breakout above this area will allow for a test of 1.1625. From there, the pair may target 1.1675, although reaching this without the support of major institutional players could be difficult. The furthest target remains the high of 1.1699. In the event of a decline, significant buying interest is expected only near 1.1485. If support is lacking there, it would be advisable to wait for a retest of 1.1410 or consider long entries from around 1.1340.

GBP/USD: Pound buyers need to break the nearest resistance at 1.3420. Only then can they aim for 1.3465, which is expected to be a tough level to breach. The furthest upward target is 1.3510. If the pair drops, bears will try to take control at 1.3365. A breakout below this support would deal a serious blow to the bulls and push GBP/USD toward the 1.3305 low, with a potential drop to 1.3245.

Jakub Novak,
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

CFTC Report: The Dollar Is Being Sold Off Again. Awaiting New Revelations from Trump

Five weeks ago, the total short position on the U.S. dollar against major currencies stopped increasing, which gave reason to believe the dollar might begin an offensive in the currency

Kuvat Raharjo 12:14 2025-06-16 UTC+2

GBP/USD. Analysis and Forecast

Today, the GBP/USD pair is attempting to regain positive momentum while remaining on the defensive. Traders prefer to wait for the release of key data before opening directional positions

Irina Yanina 12:10 2025-06-16 UTC+2

EUR/USD. Analysis and Forecast

Today, the EUR/USD pair is attempting to regain positive momentum, approaching the psychological level of 1.600 and price levels last seen in 2021. Traders are eagerly awaiting the important political

Irina Yanina 12:08 2025-06-16 UTC+2

The Israel-Iran Confrontation. Fed Meeting. What's Next? (I expect further decline in USD/CAD and a local pullback in gold before a new wave of growth)

Israel and Iran are exchanging missile strikes, but it seems markets are trying to play their own game, assuming that this conflict will not cross the nuclear threshold

Pati Gani 10:51 2025-06-16 UTC+2

EUR/USD: War Is No Ally to the Greenback

At the start of the new trading week, the EUR/USD pair stayed within the 1.15 range and is even trying to approach the resistance level of 1.1600 despite the ongoing

Irina Manzenko 10:32 2025-06-16 UTC+2

What to Pay Attention to on June 16? A Breakdown of Fundamental Events for Beginners

No macroeconomic reports are scheduled for Monday, but the market does not lack news. This week, Donald Trump announced his intention to raise all import tariffs, as none

Paolo Greco 06:46 2025-06-16 UTC+2

GBP/USD Overview – June 16: How Trump Is Undermining the Dollar

The GBP/USD currency pair will remain under the influence of geopolitics and politics in the new week. Essentially, we've been saying the same thing every day for the past four

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD Overview – June 16: The Israel-Iran Conflict Changes Nothing

The EUR/USD currency pair moved sharply back and forth throughout Friday. The pair traded with high volatility for two consecutive days, and there is a clear and logical explanation

Paolo Greco 04:54 2025-06-16 UTC+2

EUR/USD. Weekly Preview. Focus on the Middle East and the Federal Reserve

The final trading day of last week ended on an uncertain note. Reacting to Middle East developments, the EUR/USD pair sharply declined on Friday, retreating from the multi-year price high

Irina Manzenko 01:30 2025-06-16 UTC+2

Bitcoin Gripped by Fear

Charity begins at home. As it turns out, the 47th President of the United States' loyalty to the crypto industry is rooted in personal interests. Donald Trump and his family

Marek Petkovich 01:29 2025-06-16 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.