Dollar Declines Amid President Trump’s Call for Fed Governor Cook’s Resignation
By Karen Brettell | August 20, 2025
The U.S. dollar experienced a decline on Wednesday following an unexpected political development: President Donald Trump publicly urged Federal Reserve Governor Lisa Cook to resign amid allegations related to mortgages she holds in Michigan and Georgia. This move marks an escalation in Trump’s ongoing effort to exert influence over the U.S. central bank.
Trump’s call for Cook’s resignation comes as part of a broader campaign targeting key Federal Reserve officials. According to reports from the Wall Street Journal, the president is considering the even more drastic step of attempting to remove Cook from her position. This development has unsettled financial markets, with investors reacting cautiously to the potential for increased political interference in monetary policy.
Market Reaction and Expert Analysis
The dollar initially fell sharply on the news but trimmed some losses later in the day after the release of minutes from the Federal Reserve’s July 29-30 meeting. Those minutes confirmed that only two Fed policymakers had supported an interest rate cut at that time, signaling a generally cautious approach within the Fed. This information helped alleviate some concerns about imminent aggressive policy shifts.
Marc Chandler, chief market strategist at Bannockburn Global Forex in New York, commented on the situation, saying, “The market has voted with its pocketbook that it doesn’t like when the president interferes with the Federal Reserve.” Chandler also noted that the president’s moves appear to be part of a “thinly veiled attempt” to gain control over the Fed.
Trump has repeatedly criticized Fed Chair Jerome Powell for not acting swiftly enough to reduce interest rates, and financial markets anticipate that Trump will seek to appoint a more dovish chair when Powell’s current term ends in May 2026. However, Powell’s potential continuation as a Fed governor after his chairman term could limit Trump’s influence by restricting the number of appointments available to him.
Fed Policy Outlook and Currency Movements
The greenback index, measuring the dollar against a basket of currencies including the euro and Japanese yen, fell by 0.13% to 98.20. The euro strengthened modestly to $1.1657, up 0.09%, while the Japanese yen rose 0.32% to 147.2 per dollar.
Traders are closely watching for signals from Fed Chair Powell ahead of his address at the Jackson Hole economic symposium on Friday. Markets are weighing expectations for a potential rate cut at the Federal Reserve’s next meeting on September 16-17, especially following a weaker-than-expected jobs report in July.
Despite pressure for easing, Powell has expressed reluctance to cut rates prematurely, warning that ongoing tariffs may drive inflation higher during the summer months. Recent data showed consumer price inflation had a limited tariff impact, but producer price inflation remained unexpectedly high, tempering market optimism about the number and speed of any future rate cuts.
Currently, futures markets price in an 83% chance of a rate cut next month and a total of approximately 54 basis points of cuts by year-end.
Global Currency Updates
Other currencies also moved in response to central bank actions and economic data:
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The New Zealand dollar dropped 1.12% to $0.5826, hitting a four-month low after the Reserve Bank of New Zealand lowered its policy rate by 25 basis points to a three-year low of 3.00%. The central bank indicated further cuts could be forthcoming to address both domestic and external growth challenges.
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The Swedish krona gained 0.1% to 9.59 after Sweden’s central bank maintained its key interest rate at 2.00% as expected.
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Sterling weakened by 0.3% to $1.3449 in response to British inflation hitting an 18-month high in July. However, analysts do not believe this inflation spike will cause the Bank of England to change its current policy stance, as food inflation, a particular concern of the BoE, remained stable during the period.
Cryptocurrency Movements
In the cryptocurrency market, bitcoin saw a slight decline of 0.22%, trading near $113,322. —
President Trump’s direct challenge to a Federal Reserve governor highlights the increasingly politicized environment surrounding U.S. monetary policy. Markets are carefully monitoring forthcoming Fed communications to gauge how these tensions might influence future decisions.
Reporting by Karen Brettell; Additional contributions by Samuel Indyk. Editing by Mark Potter and Diane Craft.
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