Dollar dips as US Fed shakeup looms

AFP | London

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The dollar slid yesterday as President Donald Trump lined up candidates to succeed Federal Reserve boss Jerome Powell, fuelling bets of cuts to US interest rates.

Stock markets diverged and oil prices were a lot steadier as Middle East tensions eased and focus turned back to US trade negotiations.

European equities rose, led by defence companies after NATO countries on Wednesday agreed to ramp up military spending.

Rheinmetall jumped four percent in Frankfurt, while France’s Thales and Britain’s BAE systems each added almost two percent nearing midday.

Asia’s main stock market closed mixed.

“Easing tensions in the Middle East, the potential for rate cuts coming later this year, and stabilising oil prices are helping support a relatively positive outlook for equities,” noted Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Trade uncertainty resurfaced as most countries have yet to reach deals with Washington to avoid steep tariffs ahead of a July 9 deadline.

The shaky ceasefire between Iran and Israel still held yesterday and Trump said that he would hold nuclear talks with Tehran next week.

Oil prices extended a mild rebound after tumbling at the start of the week on the ceasefire announcement.

The dollar slid against main rivals after Trump’s latest salvo against Powell by suggesting he was lining up his replacement ahead of an expected departure next year.

The pound yesterday hit its highest level against the greenback since October 2021.

Since returning to the White House, Trump has constantly hit out at Powell for not cutting US interest rates, questioning his intelligence and stoking worries about the bank’s independence.

“I know within three or four people who I’m going to pick,” Trump told reporters after a NATO summit.

The Wall Street Journal reported that the president may announce a replacement as early as September, with Treasury Secretary Scott Bessent, economic adviser Kevin Hassett and former Fed governor Kevin Warsh among the contenders.

Earlier this week, Powell told lawmakers the bank would assess the impact of Trump’s tariffs on the economy before making a move.

On Wall Street, shares in chip titan Nvidia surged more than four percent to a record high Wednesday.