Dollar under pressure: Trump's conflict with the head of the Fed undermined the US currency

Financial markets were shaken by a new escalation of tensions between former US President Donald Trump and Federal Reserve Chairman Jerome Powell. On Monday, the US dollar sharply lost ground, falling to its lowest level in the past three years against the backdrop of growing uncertainty in US economic policy. This is reported by the Financial Times.

The American currency weakened against several major world currencies at once. Gold, on the contrary, rose sharply to a new historical maximum - $ 3,385 per troy ounce. The Swiss franc strengthened by 1%, to $ 0.8069 per dollar - the highest level in a decade. The euro and Japanese yen also rose by more than 1% against the dollar.

At the same time, investors began to massively sell US government bonds. The yield on 10-year US bonds rose to 4.36%, while the yield on 30-year bonds rose to 4.86%. This indicates a decline in their market value, since yields and prices are inversely related.

Financial analysts note atypical market behavior. BNP Paribas currency strategist Parisha Saimby noted: "We are seeing a disconnect between the currency market and the bond market. Typically, the dollar and bond yields do not move in opposite directions, but now we are seeing an increase in yields when the dollar falls - this is anomalous."

According to experts, the situation may be caused by global investors' fears of a recession in the US, as well as prolonged trade conflicts and the threat of new tariffs. BNY Mellon analyst Wee Khun Chong reported "a new wave of dollar asset outflows", referring to data from the internal monitoring system iFlow.

Markets reacted to statements by Kevin Gasset, head of the National Economic Council, who did not rule out the possibility of firing Jerome Powell. Trump himself has repeatedly criticized Powell for his interest rate policy, demanding their further reduction. Although the Fed cut rates three times in 2024, it remains cautious in 2025.

The first reaction was Monday's trading in Asia, which was sluggish due to a holiday in Hong Kong and Australia. The Japanese and Taiwanese stock indexes fell by 1.4% and 1.2%, respectively, while China's CSI 300 rose by 0.2%. US futures on the S&P 500 and Nasdaq lost 0.8%. Markets are waiting for further signals on the development of the conflict between the White House and the Fed, which is already starting to affect global economic stability.