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

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

Trump Sends Out "Letters of Happiness"

It has been less than two weeks since Donald Trump raised import tariffs on steel and aluminum for all countries except the UK. While negotiations with the UK were deemed

Chin Zhao 00:21 2025-06-13 UTC+2

GBP/USD. A Weak Pound Stronger Than a Weak Greenback

Following weak UK labor market data, equally soft figures on British economic growth were released on Thursday. Almost all components of the report came out in the "red zone," increasing

Irina Manzenko 00:20 2025-06-13 UTC+2

The Dollar Flees the Battlefield

The old becomes new again. The word "recession" again trended in the Forex and other financial markets. May's U.S. Consumer Price Index (CPI) fell short of Bloomberg analysts' forecasts. Following

Marek Petkovich 00:20 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.