Recently, the U.S. President commented that Fed Chair Powell should have cut interest rates sooner. After the media reported that, Trump posted on his social platform that the Fed should have lowered rates by now. Furthermore, “USA is getting rich on tariffs.”
The comments unsettled markets. The central bank is traditionally independent of the White House. It sets monetary policy with a dual mandate: maximum employment at stable prices. Although the risks of the Fed chair’s removal are low, doing so would not change much. The Chair represents the committee’s decision.
Bond investors are not panicking over any changes in the FOMC yet. Still, watch out for the 20+ Year Treasury Bond ETF (TLT) showing signs of weakness. Currently, the U.S. dollar downtrend is accelerating. The DB US Dollar Index (UUP) peaked before the President’s inauguration last December 2024. The downtrend accelerated in March after the tariff announcements.
More punitive tariff announcements on “Liberation Day” accelerated the USD decline. Investors hedged their exposure to the currency by buying Gold Shares ETF (GLD) and gold miners (GDX). Newmont (NEM) and Barrick Gold (GOLD) also surged. Those are the two best mining firms to hold as the U.S. currency continues its decline.
Your Takeaway
Any changes in the Fed would destabilize the U.S. bond prices and the country’s currency.