Trump’s Fed Pick Could Shake Markets, Dollar Dips

The upcoming selection of a new Federal Reserve chair by Donald Trump is fueling market uncertainty. Any nominee is anticipated to be more lenient on monetary policy than the current chair, Jerome Powell, potentially impacting global currency values and economic stability.

A Potential Shift in Monetary Policy

Trump is scheduled to nominate a new head of the Federal Reserve next year. The *Wall Street Journal* indicated that Trump might announce Powell’s replacement as early as September or October. Analysts suggest this could create a “shadow Fed chair,” diminishing Powell’s sway.

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“From a market perspective, of course, not only does that undermine the Fed’s credibility and independence, clearly, but it’s a risk to the outlook for US rates as well.”

—Nick Rees, Head of Macro Research at Monex Europe

The euro recently surged to $1.1744, its highest since September 2021, while the pound also strengthened against the dollar, reaching $1.3764, its highest point since October 2021. The dollar’s weakness reflects these concerns about the Fed, which could lead to further volatility. This year, the U.S. dollar has weakened 3% against a basket of currencies, a trend that may accelerate with further shifts in monetary policy (Federal Reserve Data).

Wider Economic Concerns

The strong euro benefits those in Ireland buying dollar-priced commodities. It also harms exporters shipping goods to the U.S., many of whom face a 10% tariff and the risk of it increasing. Adding to these anxieties is America’s growing national debt and the potential effect of tariffs.

The upcoming deadline for tariff talks, including negotiations with the European Commission, is July 9. The “Big Beautiful Bill,” a package of tax cuts and spending, is expected to grow America’s federal deficit. These developments are overshadowing the Middle East crisis, for now.