April 22, 2025 – Written by Frank Davies
STORY LINK Pound to Dollar Forecast: GBP, EUR Surge as USD Crashes on Trump-FED Spat
The Pound Sterling has surged to a seven-month best exchange rate level as confidence in the US Dollar has deteriorated further during the Easter weekend.
As well as fears over the economy, Trump’s criticism of Fed Chair Powell has reinforced fears that central bank independence could be compromised and the dollar posted sharp losses to fresh 3-year lows.
In this environment, the Pound to Dollar exchange rate (GBP/USD) jumped to 7-month highs above 1.3400.
EUR/USD also jumped to 41-month highs above the 1.1550 level while gold hit another record high and US equity futures lost ground.
MUFG commented; “While we think it is unlikely the Trump administration will be able to remove the Fed Chair outright given the lack of legal authority, any moves on this front will likely create an outsized market move including in FX and is something to watch closely for moving forward.”
According to Stephen Innes at SPI Asset Management; “One thing that’s absolutely clear — and no longer debatable — is that the reputational hit to the US brand is real, and it’s not fading quietly into the next news cycle.”
He added; “It’s sticking. Investors, allies, and even central banks are starting to bake in the idea that American policymaking, both fiscal and monetary, is now a geopolitical variable — not a given.”
On Friday Trump again attacked Fed Chair Powell and stated that Powell’s termination can’t come quickly enough.
The comments have inevitably stoked criticism on multiple fronts.
Chicago Fed Goolsbee commented on Sunday; “There’s virtual unanimity among economists that monetary independence from political interference — that the Fed or any central bank be able to do the job that it needs to do — is really important.”
According to Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho; “Powell does not report directly to Trump, so (Trump) cannot actually fire him. He can only be removed from office under certain procedures, which one would think have a higher barrier.
He added; “but can the president move the cogs and wheels to undermine the perceived independence of the Fed? Sure, he could.”
Even if Powell is safe in the job, talk of undermining Fed independence is crucial in damaging confidence.
Varathan added; “I would argue that they don’t even need to sack Powell immediately. You just need to create the perception that you could fundamentally change the view of an independent Fed.”
Trade fears have also undermined the dollar amid evidence that China is not backing down and is attempting to recruit countries to its cause.
On Monday, there was tough rhetoric from Beijing.
According to a statement from the Commerce Ministry; “Appeasement will not bring peace, and compromise will not be respected. To seek one’s own temporary selfish interests at the expense of others’ interests is to seek the skin of a tiger.”
It added; “That approach will ultimately fail on both ends and harm others”.
Trump has again complained vigorously about non-tariff barriers including VAT. This focus on areas such as domestic taxation will make it even more difficult to secure trade deals.
According to French Finance Minister Eric Lombard; “Donald Trump has hurt the credibility of the dollar with his aggressive moves on tariffs — for a long time.”
He added; “If Powell is pushed out this credibility will be harmed even more, with developments in the bond market.”
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TAGS: Pound Dollar Forecasts
