NEW YORK — The U.S. dollar staged a modest rebound against the euro and pound on Wednesday, August 27, 2025, after a sharp decline earlier this week, but investor caution persists amid President Donald Trump’s escalating confrontation with the Federal Reserve. According to Bloomberg, the dollar strengthened by 0.3% against the euro to $1.162 and 0.4% against the pound to $1.314, recovering from a 0.1% dip on Tuesday. Yet, concerns over the Fed’s independence, fueled by Trump’s attempt to oust Governor Lisa Cook, continue to unsettle markets.
Trump’s unprecedented move to fire Cook on Monday, citing unconfirmed allegations of mortgage fraud, has triggered a legal showdown. Cook, the first Black woman on the Fed’s Board of Governors, responded defiantly, stating, “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so.” Her attorney, Abbe Lowell, told Bloomberg, “His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action.” The Federal Reserve Act allows removal only “for cause,” typically interpreted as malfeasance, a standard legal experts say Trump’s allegations fail to meet.
The dispute has heightened fears of eroding Fed autonomy, with market analysts warning of long-term economic risks. “The market has been too focused on whether Trump might try to fire Powell and not focused enough on the prospects for sweeping Trumpification of the Fed board,” wrote Krishna Guha and Marco Casiraghi of Evercore ISI, per The New York Times. Key market impacts include:
- U.S. dollar index up 0.2% after a 0.3% drop post-Cook firing announcement.
- Treasury yields rose, with 10-year notes at 4.29%, reflecting uncertainty.
- Gold prices steadied near $3,370 per ounce as a safe-haven asset.
Trump’s broader campaign, including threats to influence Fed Chair Jerome Powell and install loyalists like Stephen Miran, has sparked criticism. Senator Elizabeth Warren called it “an authoritarian power grab that blatantly violates the Federal Reserve Act.” As Cook’s lawsuit heads toward a potential Supreme Court battle, investors brace for volatility ahead of the Fed’s September 16-17 meeting, where a 25-basis-point rate cut remains likely.
Source: Bloomberg
