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

Gold Rebounds as Fiscal Risks Resurface

Gold is swinging between extremes as spring draws to a close. The week ending May 16 was the worst for the precious metal due to optimism that, following a trade

Marek Petkovich 17:31 2025-05-23 UTC+2

AUD/JPY. Analysis and Forecast

Today, the AUD/JPY pair has started to attract buying interest, halting its pullback from the monthly high as demand for the Australian dollar emerges. Today's talks between U.S. Deputy Secretary

Irina Yanina 17:25 2025-05-23 UTC+2

USD/CAD. Analysis and Forecast

The pair is trending lower, dropping close to the key psychological level of 1.3800 amid broad-based U.S. dollar weakness. Traders have raised their expectations for Federal Reserve rate cuts following

Irina Yanina 16:43 2025-05-23 UTC+2

USD declares war on EUR

What's new is often just what's been forgotten. As spring draws to a close, the long-dismissed mantra "sell America" is making a comeback in markets. The phrase gained traction following

Marek Petkovich 14:59 2025-05-23 UTC+2

USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed

Irina Manzenko 13:52 2025-05-23 UTC+2

Market Chaos to Continue (There is a likelihood of continued local declines in #USDX and gold prices)

Markets continue to act blindly amid the chaotic actions of Donald Trump, who is trying to pull the U.S. out of a deep, all-encompassing crisis like Baron Munchausen pulling himself

Pati Gani 10:19 2025-05-23 UTC+2

The Market Tucks Its Tail

A necessary project at the wrong time. The House of Representatives has approved Donald Trump's tax cut initiative. The President hopes it will help stimulate the economy and offset shortcomings

Marek Petkovich 09:29 2025-05-23 UTC+2

GBP/USD Overview – May 23: No Talks, but Hang in There

On Thursday, the GBP/USD currency pair traded relatively calmly, but like EUR/USD, it has been rising for two weeks. At first glance, one might wonder what reasons traders have

Paolo Greco 08:15 2025-05-23 UTC+2

EUR/USD Overview – May 23: The Rebellion Against the Dollar Continues

The EUR/USD currency pair traded relatively calmly on Thursday, yet it has risen significantly over the past two weeks. This movement can be interpreted in several ways. From a technical

Paolo Greco 08:15 2025-05-23 UTC+2

What to Pay Attention to on May 23? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Friday. Only two are noteworthy: the final estimate of Germany's Q1 GDP and April's UK retail sales data. The German GDP report

Paolo Greco 05:58 2025-05-23 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.