|

USD: The battle for the Fed continues – Commerzbank

The dispute over Lisa Cook, the Fed governor dismissed by Trump, continued yesterday. The US Vice President emphasised that Trump should have the right to dismiss governors. Kevin Hassett, one of the candidates to succeed Jerome Powell as Fed chair, suggested that Cook take a temporary break while the ongoing proceedings against her for alleged fraud were ongoing. Given the statements made by Trump loyalists, one can't help but wish that they would apply the same standards to their own loyalists, Commerzbank's FX analyst Antje Praefcke notes.

Battle for Fed independence has only just begun

"This does not mean that Cook should remain in office if she is found guilty of fraud. However, these are merely allegations made by another extremely loyal Trump supporter (who, strangely enough, must have been closely involved in the activities of Fed officials). So far, nothing has been proven, and no proceedings have concluded. My colleague Volkmar emphasised last week that the offence Cook is accused of is widespread. Yesterday, there were also reports that Cook would soon be filing a lawsuit against her dismissal. That is likely to keep the courts busy for a while."

"When we recently expressed concern about the independence of the Fed in the context of attacks on Jerome Powell, we were often told that Powell only had one vote and that it would therefore not be so bad for the USD. The battle over Lisa Cook makes it clear that this is unlikely to be the end of it. A few days ago, Trump posted a picture dividing decision-makers into Trump loyalists (Waller, Miran and Bowman) and Biden candidates (Jefferson, Barr and Powell)."

"Setting aside the fact that Powell was appointed by Trump and only confirmed in office by Biden, the attacks on Cook and Powell are likely to extend to other candidates who oppose interest rate cuts. Not to mention that the Trump administration is seeking to gain more influence over the appointment of regional Fed chiefs, with the aim of appointing more decision-makers in line with its agenda. Clearly, the battle for Fed independence has only just begun."

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

AUD/USD consolidates gains just above 0.7000

AUD/USD rebounds sharply and manages to reclaim the area beyond the 0.7000 threshold on Wednesday. Indeed, the pair sets aside two daily drops in a row and regains balance on the back of the marked pullback in the Greenback as investors keep assessing the results from the US Midterms elections.

USD/JPY declines below 158.00 as USD weakens on midterm election results

USD/JPY comes under heavy selling pressure on Wednesday, dropping below 158.00 during the Asian session as the US Dollar slumps to a one-month low amid heightened political uncertainty after early US midterm vote counts. Moreover, the prospect of gridlock in Washington drives safe-haven flows, triggering a fresh leg down in US bond yields and further weighing on the buck.

Gold pops to four-day highs near $4,050

Gold manages to regain some composure, leaving behind two consecutive daily pullbacks and reclaiming the area above the key $4,000 mark per troy ounce on Wednesday. The strong decline in the US Dollar, shrinking US Treasury yields across the curve and lower crude oil price all contributes to the yellow metal’s recovery.

Bitcoin and Gold Outlook: BTC tops $80K, XAU reclaims $4,000 as Democrats take control of Congress
Bitcoin (BTC) and Gold (XAU/USD) are gaining momentum on Wednesday, as bulls stage a comeback. BTC’s position above $80,000 signals a bullish turnaround, erasing sharp losses from the Binance hack, which impacted $6.3 billion. Meanwhile, Gold’s recovery above $4,000 could strengthen bullish sentiment after the United States (US) midterm elections.
US midterms 2026: Investor Q&A on the Democratic sweep
1. Gridlock replaces the stimulus narrative. A Democratic Congress would constrain Trump's ability to pursue additional fiscal expansion and legislative tax measures. But it cannot simply reverse the president's entire economic agenda. Executive powers, existing legislation and presidential vetoes remain important. 2. AI faces a higher hurdle, not an extinction event.
US Dollar breaks below 101.50 as Democrats sweep Congress
The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.