Investors Start Selling Off U.S. Assets As Trump Continues Attack on Federal Reserve’s Jerome Powell

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Investor confidence in the Federal Reserve has taken a fresh hit after President Donald Trump publicly called on Chairman Jerome Powell to resign. That political move, along with reports that Trump is exploring the legality of firing Powell, sent the dollar tumbling to a three-year low against the euro and rattled global markets.

Gold surged to a record $3,393 per ounce as investors scrambled for safe-haven assets. The Japanese yen and Swiss franc also soared, marking seven-month and ten-year highs against the U.S. dollar, respectively. Meanwhile, U.S. stock futures and Treasuries declined, revealing how vulnerable American markets become when the Fed’s independence is in question.

The Bloomberg Dollar Spot Index fell another 0.5%, following a 0.7% drop the previous week. Hedge funds have become the most bearish on the greenback since October, as confidence in U.S. monetary policy erodes under Trump’s attacks.

Why Trump Wants to Lower Interest Rates, Even at a Cost

Despite warnings from economists that aggressive rate cuts now could trigger inflation or even stagflation, Trump has consistently pressured the Federal Reserve to slash interest rates. His motivation isn’t rooted in economic orthodoxy. It’s political and strategic.

First, Trump wants a weaker dollar to boost U.S. exports and narrow the trade deficit. A cheaper greenback makes American products more affordable overseas, aiding the manufacturing base and aligning with his “America First” trade agenda. While that may sound beneficial, it undermines confidence in the U.S. as a stable store of value.

Second, lower interest rates create the illusion of economic strength. Borrowing becomes cheaper, stock prices tend to rise, and economic activity appears to surge—right in time for a re-election push. But such stimulus at a time of already-elevated inflation and tight labor markets risks overheating the economy.

Finally, Trump likely views Powell as a political adversary. The Fed’s refusal to bow to pressure during his previous term remains a sore point. Reasserting control over the central bank could allow Trump to recalibrate economic levers on his own terms, regardless of long-term consequences.

The Risk of Undermining the Federal Reserve

The Fed’s credibility is based on its independence from political interference. This autonomy allows it to make unpopular but necessary decisions like raising interest rates to combat inflation. Any indication that the Fed is becoming a political tool damages global trust in U.S. institutions.

Recent remarks by National Economic Council Director Kevin Hassett did little to calm nerves. He confirmed that Trump is “studying” the possibility of firing Powell, an unprecedented move that would roil legal frameworks and investor assumptions.

Chicago Fed President Austan Goolsbee voiced concern over growing doubts about the central bank’s autonomy. “We are in dangerous territory if markets believe political pressure guides monetary policy,” he warned on Sunday.

The market reaction has been swift. U.S. bonds sold off, sending yields on 10-year Treasuries up to 4.36% and 30-year yields to 4.87%. Meanwhile, investors are rotating into foreign currencies, gold, and emerging market bonds—assets seen as safer from political risk.

The Sell America Wave Is Crashing Through

Trump’s rhetoric is already triggering a “sell America” wave. Global investors are reevaluating their exposure to U.S. equities, bonds, and currency. The euro hit $1.15, a level not seen since 2022. The Swiss franc climbed 1.2% to SFr0.8069, its strongest in a decade. These shifts suggest that institutional money is moving fast and hard out of dollar-based assets.

Markets are also adjusting to a new reality where economic policy is unpredictable. As Trump prepares for a possible return to the White House, investors must consider how long the Fed’s independence will hold. If Powell is pushed out or politically neutralized, the Fed could begin acting less like a regulator and more like a campaign tool.

That scenario would be catastrophic for U.S. asset credibility, which is why the dollar, which was once a symbol of global stability, is starting to act like a risk asset itself.

Should investors prepare for a new era of politically driven monetary policy? Tell us what you think!

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