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Dollar Declines After Trump Announces Resignation of Lisa Cook from US Federal Reserve
The US dollar declined against most major currencies during trading on Tuesday, August 26, after US President Donald Trump announced the dismissal of US Federal Reserve Board Member Lisa Cook, an unprecedented move that raised concerns about the bank's independence.
The dollar index, which measures the US currency's performance against six major currencies, fell 0.24% to 98.19.
The euro rose 0.27% against the US currency to $1.1649, and the British pound rose 0.14% to $1.3473.
The dollar fell 0.30% against the Japanese yen to 147.33 yen, and also declined against the Swiss franc, with the franc rising 0.24% to $0.80400.
These moves come after the US President announced the removal of a Federal Reserve member due to allegations of mortgage-related misconduct, a move that will likely test the limits of Trump's authority over the Federal Reserve. Lisa Cook commented on the move, saying that the US President does not have the authority to remove her from the Fed, and that she will not resign.
The move surprised markets, but the reaction was somewhat muted, as traders were torn between concerns about the politicization of monetary policy and the potential benefits to markets of the pressure to cut rates.
Carl Schamuta, senior market strategist at Corbay in Toronto, commented, "The hype surrounding Trump's attempt to remove Fed member Cook has largely kept markets quiet," according to Reuters.
President Trump has previously criticized Federal Reserve Chairman Jerome Powell several times for not cutting interest rates, but he has not elaborated on any threats to remove him before his term ends in May.
Markets currently price in an 86% chance of the Fed cutting rates at its next meeting next month. "Investors held onto the dollar this morning after the administration's unexpected actions, which could erode confidence in the US and portray the central bank as a subservient institution in the future," said Yuto Shinohara, chief investment strategist at Meserow Currency Management.
