The U.S. dollar fell sharply on Wednesday following reports that President Donald Trump asked congressional Republicans whether he should dismiss Federal Reserve Chair Jay Powell, a move that raised concerns about the independence of the central bank and rattled global financial markets.
According to a senior White House official who spoke with the Financial Times, Trump broached the topic during a meeting in the Oval Office late Tuesday with Republican lawmakers. The official added that those present were generally supportive of the idea.
Speculation intensified after Florida Congresswoman Anna Paulina Luna posted on X that she was “hearing” Powell’s dismissal was imminent. However, the White House official pushed back against suggestions that Powell’s removal was about to happen immediately.
The market reaction was swift. The U.S. dollar dropped 0.9% against a basket of major currencies, reflecting investor concern over potential political interference in monetary policy. U.S. equity markets also declined, with stocks falling to their lowest levels in two weeks.
Analysts interpreted the sell-off as a reaction to uncertainty over the Fed’s future direction and fears that a new Fed chair may be more susceptible to political pressure. In the Treasury market, the two-year yield — which is closely tied to interest rate expectations — also fell, signaling that traders anticipate a faster pace of rate cuts if Powell is replaced.
The developments underscore growing tensions between the Trump administration and the Federal Reserve. Although the Fed operates independently, any attempt by the president to remove its chair could undermine that perception, creating volatility in currency, equity, and bond markets.
The Federal Reserve and the White House have yet to issue an official statement regarding Powell’s future. However, the mere prospect of such a shake-up has already had significant market implications, highlighting investor sensitivity to the central bank’s leadership and credibility.
