U.S. Dollar Falls to 3.5-Year Low Amid Rate Cut Expectations and Trump Criticism of Fed
Euro and pound surge as traders anticipate Federal Reserve interest rate cuts; Trump eyes Powell replacement by fall.
Watan-The U.S. dollar fell to its lowest level in three and a half years against the euro and British pound on Thursday, amid a broad selloff driven by expectations that the Federal Reserve will soon lower interest rates.
Eric Theoret, a foreign exchange strategist at Scotiabank in Toronto, commented:“The focus this week has been on the Fed and the possibility of a sooner—and potentially deeper—series of rate cuts.”
Federal Reserve Chair Jerome Powell emphasized the need for the central bank to remain cautious, warning of potential inflationary pressure this summer.
Meanwhile, U.S. President Donald Trump is expected to appoint a new Fed Chair next year, likely someone more inclined toward easing monetary policy than Powell, whose term ends in May.
On Wednesday, Trump publicly criticized Powell, calling him “obnoxious” for not slashing interest rates more aggressively. Powell, in testimony before the Senate, said monetary caution was essential, especially given Trump’s tariff plans, which could fuel inflation.
According to a report in the Wall Street Journal, Trump is considering announcing Powell’s replacement by September or October.
Markets React: Currency and Rate Forecasts Shift
Futures traders increased their expectations for Fed rate cuts to 65 basis points by year-end—up from 46 basis points last Friday. The first rate cut is now expected in September.
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The euro rose 0.39% to $1.1705, reaching a peak of $1.1744, its highest level since October 2021.
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The British pound gained 0.45% to $1.3728, peaking at $1.3764, also the highest since October 2021.
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The Swiss franc hit a 10.5-year high at $0.80.
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The dollar dropped 0.61% to 144.38 yen.
Broader Pressure on the Dollar
The greenback is also facing pressure as global investors diversify away from U.S. assets, citing concerns over the economic outlook and dollar stability.
Trump’s volatile tariff policies are again under scrutiny, with the July 9 deadline for new trade agreements looming.
Crypto Market Note
In the crypto space, Bitcoin slipped 0.65%, trading around $107,144.
