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Pound touches near 4-year high as Trump rattles dollar | Pound touches near 4-year high as Trump rattles dollar |
(32 minutes later) | |
The pound briefly hit its highest level against the dollar for almost four years after markets were unnerved by a report that US President Donald Trump could bring forward the naming of the new head of the US central bank. | The pound briefly hit its highest level against the dollar for almost four years after markets were unnerved by a report that US President Donald Trump could bring forward the naming of the new head of the US central bank. |
Sterling rose above $1.37, which is the strongest since October 2021. | Sterling rose above $1.37, which is the strongest since October 2021. |
The dollar weakened after the Wall Street Journal reported Trump had considered naming Jerome Powell's replacement as head of the Federal Reserve by September or October. | The dollar weakened after the Wall Street Journal reported Trump had considered naming Jerome Powell's replacement as head of the Federal Reserve by September or October. |
The US Fed is independent from the government and Mr Powell chairs a committee that decides on interest rates which have remained unchanged this year, prompting a series of angry outbursts from Trump. | The US Fed is independent from the government and Mr Powell chairs a committee that decides on interest rates which have remained unchanged this year, prompting a series of angry outbursts from Trump. |
On Wednesday, Trump called Mr Powell "terrible" and said he was looking at "three or four people" who could replace him. Mr Powell's term is due to end in May 2026. | On Wednesday, Trump called Mr Powell "terrible" and said he was looking at "three or four people" who could replace him. Mr Powell's term is due to end in May 2026. |
There are concerns the US president could install someone who is sympathetic to his demands. | There are concerns the US president could install someone who is sympathetic to his demands. |
Earlier this week, Mr Powell told US lawmakers the Fed would wait and see how the American economy reacts if Trump's so-called retaliatory tariffs against a range of countries come into force next month, after being paused until 9 July. | Earlier this week, Mr Powell told US lawmakers the Fed would wait and see how the American economy reacts if Trump's so-called retaliatory tariffs against a range of countries come into force next month, after being paused until 9 July. |
The Fed is concerned that the levies, which are paid by the businesses importing the goods, might push up inflation. | The Fed is concerned that the levies, which are paid by the businesses importing the goods, might push up inflation. |
The US economy shrank in the first three months of this year - the first decline for three years - as government spending fell and imports rose as firms raced to get products into the country before the tariffs went live. | The US economy shrank in the first three months of this year - the first decline for three years - as government spending fell and imports rose as firms raced to get products into the country before the tariffs went live. |
JP Morgan, the investment bank, has lowered the chance of the US economy falling into recession this year but at 40% the probability of a slowdown remains comparatively high. | JP Morgan, the investment bank, has lowered the chance of the US economy falling into recession this year but at 40% the probability of a slowdown remains comparatively high. |
Kaspar Hense, a senior portfolio manager at RBC BlueBay Asset Management, said traders were betting the dollar would fall "in this environment, where there is an erosion of institutions". | Kaspar Hense, a senior portfolio manager at RBC BlueBay Asset Management, said traders were betting the dollar would fall "in this environment, where there is an erosion of institutions". |
While Kit Juckes, chief FX strategist at Societe Generale, said: "I think the market is pricing in President Trump appointing someone who at least at first sight appears more sympathetic to his cause." | While Kit Juckes, chief FX strategist at Societe Generale, said: "I think the market is pricing in President Trump appointing someone who at least at first sight appears more sympathetic to his cause." |
Academics have said that confidence in the Fed's independence is key to maintaining financial markets' faith that inflation will be controlled. | |
If this confidence is shaken, it could lead to higher borrowing costs for everyone if investors demand higher interest rates for holding debt. | |
There is speculation that Kevin Warsh, a former governor at the Fed, may be considered for the role. | |
Earlier this month, Trump was asked about whether Warsh could become the Fed's chair, to which he replied: "He's very highly thought of." | |
US Treasury Secretary Scott Bessent could also be a candidate, according to reports. | |
He recently told lawmakers in the House of Representatives that he currently has "the best job" in Washington and is "happy to do what President Trump wants me to do". | |
Mr Powell was himself a Trump appointee. During Trump's first term in the White House, Mr Powell replaced the then Fed chair Janet Yellen. | Mr Powell was himself a Trump appointee. During Trump's first term in the White House, Mr Powell replaced the then Fed chair Janet Yellen. |
Trump had criticised Ms Yellen for keeping interest rates too low, stating: "I think she should be ashamed of herself." | Trump had criticised Ms Yellen for keeping interest rates too low, stating: "I think she should be ashamed of herself." |
Ms Yellen went on to become the US Treasury Secretary under President Joe Biden and said she did not think that Trump had a grasp of macroeconomic policy. | Ms Yellen went on to become the US Treasury Secretary under President Joe Biden and said she did not think that Trump had a grasp of macroeconomic policy. |
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