The dollar and U.S. Treasuries slipped in Asian trading on Tuesday after President Donald Trump announced his intent to remove a Federal Reserve governor, a move that unnerved investors and raised questions about the central bank’s independence.
Trump said there was enough evidence that Lisa Cook had made false statements on mortgage applications, a claim that intensified already heightened tensions with the Fed. The president has historically attacked the central bank’s independence and has frequently flirted with firing Fed Chair Jerome Powell, who was nominated by Trump and is nearing the end of his term next May. Cook’s exit could accelerateTrump’s reshaping of the Fed, though her term was due to run until 2038.
In markets, the dollar dipped 0.4% to 147.24 yen, while the euro rose about 0.3% to $1.165. U.S. Treasury yields moved higher, with the benchmark 10-year note climbing to about 4.289% from 4.275% on the prior day. Stock markets across Asia followed U.S. losses, with MSCI’s broadest index of Asia-Pacific shares outside Japan down about 0.2% and Japan’s Nikkei sliding around 1.3%.
Fed policy expectations were also in focus. Major brokerages including Barclays, BNP Paribas and Deutsche Bank now anticipate a 25-basis-point cut in September, and futures markets were signaling roughly an 84% probability of a September cut, according to the CME Group’s FedWatch Tool.
Data ahead could still sway policy. The U.S. personal consumption expenditures price index, the Fed’s preferred inflation gauge, is due on Friday, and hotter-than-expected producer prices last month had already cast doubt on the certainty of a cut.
On the commodities side, U.S. crude dipped about 0.4% to $64.56 a barrel, while gold traded higher at around $3,378 per ounce. S&P 500 e-minis were down roughly 0.17% at about 6,444.5.
What to watch next: The legality and process of Cook’s removal could become a flashpoint in the balance between executive authority and central-bank independence. The Fed’s credibility and future policy signals might hinge on how the administration fills Cook’s seat and how the courts interpret removal powers. Investors will be listening closely to upcoming inflation data and any official statements from the Fed as September approaches, to gauge how much policy will be influenced by political developments versus economic data.
Summary: The move to potentially dismiss a sitting Fed governor sparked immediate market reaction, highlighting tensions between political leadership and central-bank independence, while keeping investors focused on upcoming inflation readings and the path of future rate cuts. Positive note: despite volatility and political noise, markets remain responsive to data-driven policy signals and the ongoing dialogue on inflation and growth. Negative: the episode underscores heightened political risk surrounding U.S. monetary policy and could complicate credibility in the near term.
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