empty
22.04.2025 01:07 AM
The Dollar Meant Well. But Things Went as Usual

Be careful what you wish for. Donald Trump's desire to make America great again and return to a golden age is backfiring by eroding trust in U.S. assets, capital flight, and a weakening dollar. The USD Index has fallen to its lowest levels since September, while the EUR/USD rally has accelerated amid the White House's criticism of Jerome Powell.

Can the U.S. President fire the Fed Chair he appointed? Formally, no, but the law does mention removal "for cause." In 2021, Powell and his colleagues viewed inflation as transitory, waited too long to raise rates, and, as a result, prices surged even further. The response to accelerating inflation was delayed, so Trump arguably has grounds to criticize the Fed chief. But this time, the story is different.

Average Interest Rate Dynamics in Developed Countries

This image is no longer relevant

According to Bloomberg, central banks in developed nations are expected to lower borrowing costs by an average of 50 basis points by the end of 2025 to counteract the negative effects of trade wars. However, the theory says that the country imposing tariffs faces high inflation; the one facing those tariffs faces an economic slowdown. Other central banks have justification to ease monetary policy. The Fed does not. Powell is doing everything right, but the White House has other plans.

Monetary expansion could act as a lifeline for U.S. stock indices but would also further accelerate inflation, especially since tariffs are not the only factor fueling price growth. One of the key drivers of U.S. GDP growth in 2023–2024 was population increase, particularly due to immigration. If the economy loses 5.5 million semi-legal workers, it will lose momentum, while wages, on the contrary, will accelerate.

U.S. Dollar Performance

This image is no longer relevant

This outlines a stagflation scenario: the labor market is cooling, but prices are rising rapidly. This ties the Fed's hands, which operates under a dual mandate—controlling inflation and maintaining employment. The economy is suffering, and with it, the dollar. It's no surprise that speculators are dumping dollars, and Deutsche Bank now calls German and Japanese bonds a better safe-haven alternative to U.S. Treasuries.

This image is no longer relevant

According to French Finance Minister Eric Lombard, firing Powell would undermine trust in the U.S. dollar and destabilize the American economy. These processes are already well underway, but a loss of Fed independence would be the catalyst for a EUR/USD rally.

Technically, the daily chart of the main currency pair shows a recovery in the uptrend. Theoretically, the pair's return below 1.148 could trigger a reversal pattern like Anti-Turtles. But until that happens, bulls remain in control. It makes sense to hold and add to existing long positions in EUR/USD with targets at 1.16 and 1.12.

Marek Petkovich,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Market Hears What It Wants to Hear

How far will greed carry the crowd? The late April rally in the S&P 500 somewhat sweetened the bitter pill for Donald Trump. His first 100 days in office have

Marek Petkovich 09:23 2025-04-30 UTC+2

What to Pay Attention to on April 30? A Breakdown of Fundamental Events for Beginners

A considerable number of macroeconomic events are scheduled for Wednesday, but we doubt they will have any meaningful impact on currency pair movements. The market continues to ignore most macroeconomic

Paolo Greco 06:28 2025-04-30 UTC+2

GBP/USD Overview – April 30: The Illusion of U.S. Democracy and Trump's Impeachment

The GBP/USD currency pair saw a slight downward correction after Monday's rise, which came out of nowhere. However, it's difficult to call this minor move a "dollar recovery." The U.S

Paolo Greco 03:29 2025-04-30 UTC+2

EUR/USD Overview – April 30: The Main Mystery of 2025 Revealed

The EUR/USD currency pair continued trading within a narrow range on Tuesday, showing relatively low volatility. In reality, 80 pips per day is not a bad volatility level

Paolo Greco 03:29 2025-04-30 UTC+2

NZD/USD: Bullish Prospects Amid Uncertainty

Although the past week was completely uninformative regarding fundamental indicators, it allowed adjustments to forecasts on economic growth, inflation, and the Reserve Bank of New Zealand's policy strategy based

Kuvat Raharjo 00:43 2025-04-30 UTC+2

USD/CAD: The Loonie and Politics

Early parliamentary elections were held in Canada, resulting in the Liberal Party, led by Mark Carney, forming the government. Carney will face the difficult task of negotiating with Donald Trump

Irina Manzenko 00:42 2025-04-30 UTC+2

The Dollar Steps on the Same Old Rake

Trust is hard to earn and easy to lose. While markets assess Donald Trump's first 100 days in office, believers in historical signs point to an event in late April

Marek Petkovich 00:42 2025-04-30 UTC+2

Further Tariff Concessions from Trump

According to rumors and statements from officials, U.S. President Donald Trump intends to soften automobile tariffs by supporting some changes sought by the industry. This will allow for the cancellation

Jakub Novak 18:48 2025-04-29 UTC+2

Trade Negotiations Between China and the U.S. Are Ongoing. Markets Await Results (There Is a Risk of Local Declines in EUR/USD and GBP/USD Pairs)

Markets have once again paused amid uncertainty over whether a trade agreement between the U.S. and China will be reached anytime soon. The cloud of uncertainty that Donald Trump

Pati Gani 10:04 2025-04-29 UTC+2

The Market Has Licked Its Wounds

The market always keeps us engaged. Despite all the gloomy talk of recession, trade wars, supply shortages, inflation, and layoffs, the S&P 500 has declined by just a little over

Marek Petkovich 09:10 2025-04-29 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.