June 26, 2025

“The dollar continues to weaken to multiyear lows, this time as a result of Trump’s latest criticism of the Fed Chair.”

Sam Cornford – Head of Trading

USD

With the market happy to ignore the Iran-Israel war for now, dollar selling has resumed at an intense pace. It has fallen more than 2% over the last three days, and the latest drop overnight has been fuelled by renewed fears about the erosion of Federal Reserve independence. After Trump ramped up his attacks on Powell on Truth Social and in press conferences over the last week, the WSJ reported yesterday that he has been considering naming his successor as early as September or October – well in advance of his term’s end in May 2026. Having effectively a ‘shadow’ chair that can jump on TV and undermine Powell’s decisions with a more dovish attitude would be seriously damaging to the Fed’s credibility. This comes after Waller and Bowman – both Trump appointees – have openly made arguments for sooner rate cuts recently. Powell stuck to the line that it is a good time to wait during his Senate testimony yesterday.

Today, the main data is durables goods orders, unemployment claims, and a third estimate for Q1 GDP. There may be more attention paid to the Fed speakers given the current headlines, with Goolsbee, Hammack, Barkin, and Daly all set to speak.

GBP

Sterling is trading at its strongest level since early 2022 and is inching closer to 1.40, after rising 2.8% since Monday morning. As has typically been the case recently, the move has almost nothing to do with the UK itself. It has been a quiet week for domestic data and British central bankers have not sought to rock the boat at all with their speeches – it is simply moving in line with dollar sentiment and geopolitical risk. Gov Bailey speaks this afternoon, however.

EUR

EURUSD continues to break new ground and is approaching a four-year high this morning. Again, this is almost entirely a weaker dollar story rather than any notable euro strengthening. And as it nears the 1.20 mark, it is interesting to look back at the large number of 2025 EURUSD forecasts that expected it to sink to parity by mid-year. Trump’s second term as president has been unpredictable, to say the least. The only significant economic news to come out of the eurozone yesterday were Trump’s threats to double tariffs on Spain if they did not comply with the 5% military spending target set at the NATO meeting yesterday.

Markets

European stocks went back into reverse and US markets lost their momentum as Trump ramped up his attacks on Powell and spooked fears that the world’s most important central bank would have its independence eroded. Sentiment is a touch better this morning, however, and futures are looking slightly positive.

Main Economic Events (All Times CET)

8:00am: German GfK Consumer Confidence
2:30pm: US Q1 GDP 3^rd Estimate, Unemployment Claims & Durable Goods Orders

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