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 Fed Allows Only One Rate Cut in 2025

The Federal Reserve continues to remain silent this year. While the European Central Bank has already cut interest rates three times and the Bank of England twice, the FOMC

Chin Zhao 00:40 2025-05-20 UTC+2

AUD/USD. RBA May Meeting: Preview

The Reserve Bank of Australia (RBA) will conclude its meeting on Tuesday, May 20, which may result in a softening of monetary policy parameters. The "dovish" scenario is the most

Irina Manzenko 00:40 2025-05-20 UTC+2

The Dollar Has Sold America Out Completely

Overall, the strength of the EUR/USD uptrend remains intact. The erosion of confidence in the U.S. dollar outweighs the divergence in monetary policy between the Fed and the ECB. Technical

Marek Petkovich 00:40 2025-05-20 UTC+2

AUD/USD. Analysis and Forecast

Spot prices for the AUD/USD pair remain within the familiar range held over the past month, as traders await a fresh catalyst before committing to the next directional move

Irina Yanina 18:22 2025-05-19 UTC+2

WTI – West Texas Intermediate. WTI Crude Holds Modest Intraday Losses

Today, West Texas Intermediate (WTI) crude oil is holding modest intraday losses. Uncertainty surrounding the ongoing US-Iran nuclear talks, along with rising tensions between Estonia and Russia following Sunday's detention

Irina Yanina 18:16 2025-05-19 UTC+2

USD/CAD. Analysis and Forecast

On Monday, the first trading day of the week, the USD/CAD pair attempted to gain significant upward momentum during the Asian session, but the European session failed to support this

Irina Yanina 18:03 2025-05-19 UTC+2

Bitcoin falls prey to crooks

Trust in the financial world is not exclusive to the US dollar. News that scammers have stolen data from approximately 197,000 clients of Coinbase — the world's largest crypto exchange

Marek Petkovich 13:20 2025-05-19 UTC+2

Are There Reasons for the Market Rally to Continue? (Possible Decline in AUD/USD and Growth in GBP/USD)

The coming week is expected to be light on major events or dramatic headlines—no new promises from Donald Trump to shake the world. Nevertheless, there will still be factors worth

Pati Gani 09:52 2025-05-19 UTC+2

The Market Has Gone Too Far

Nothing seems to matter. One would think that after the White House signed trade agreements with Britain and China, and following Donald Trump's visit to the Middle East, the S&P

Marek Petkovich 09:18 2025-05-19 UTC+2

What to Pay Attention to on May 19? A Breakdown of Fundamental Events for Beginners

On Monday, there are very few macroeconomic events scheduled. The only noteworthy release will be the second estimate of the Consumer Price Index (CPI) for April in the Eurozone, which

Paolo Greco 07:34 2025-05-19 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.