Trump’s renewed Fed attacks help pound climb to three-year high
The pound has stormed to its highest level against the dollar in over three years after President Donald Trump launched a new tirade of attacks on the Federal Reserve.
Sterling rose over 0.6 per cent to near $1.3725 as Trump indicated he was lining up successors for the Fed’s chair Jerome Powell, despite Powell’s term not set to expire until 2026.
Meanwhile, the DXY index, which tracks the dollar against a basket of currencies, tumbled 0.56 per cent to around 97.13.
Gains in the pound have been fuelled by Trump’s remarks during his visit to Europe for the NATO summit.
The President said he had “three or four people” he was weighing to replace Powell after describing the chair as “terrible” and “stupid”.
Trump’s outbursts follow repeated calls for the Fed to cut interest rates, which the President hopes will drive economic growth.
But Powell has remained hesitant and reaffirmed his “wait-and-see” approach to rates during a congressional hearing earlier this week.
Should Trump successfully oust Powell, “the consensus is that [he] will pick a dovish chair, who is likely to cut interest rates” said research director at XTB Kathleen Brooks.
Brooks added: “This triggered a decline in US bond yields, which has weighed on the dollar.”
Trump points finger at Powell
The President has quickly jumped to blast Powell in recent months when economic data has disappointed.
After figures released at the beginning of June showed the private sector added 37,000 jobs in May – the smallest gain since March 2023 and well below forecasts of 110,000 – Trump said Powell was “unbelievable”.
“Powell must now lower the rate….Europe has lowered nine times,” he added.
The Fed chair’s hawkish stance has been fueled by his mission to bring down inflation caused by the White House’s tariffs.
Powell said on Tuesday he expected “tariff inflation to show up more” as he told the House Financial Services Committee the Fed “don’t know how much of that’s going to be passed through to the consumers”.
Powell’s term as chair of the Fed will end in May next year, though he will continue on the board of governors for another two years after.