Dollar Slumps as Fed Independence in Question; Euro and Gold Surge on Haven Demand – Action Forex
Dollar weakened broadly in thin holiday trading today, dragged down by mounting concerns over the independence of the Federal Reserve. Investor anxiety escalated after White House economic adviser Kevin Hassett indicated that US President Donald Trump is continuing to explore whether he can remove Fed Chair Jerome Powell. While the legal basis for such a move is untested and unclear, the mere suggestion of political interference in the central bank’s policy process has significantly undermined market confidence.
This brewing conflict comes amid already heightened uncertainty surrounding US trade policy. Trump’s aggressive use of tariffs, most recently through sweeping reciprocal levies, has put the Fed in a difficult position. Officials including Powell have repeatedly warned that tariffs could simultaneously fuel inflation and suppress economic growth, increasing the risk of stagflation. A sudden crystallization of the threat to Fed independence would not only worsen market volatility but also raise tail risks, potentially triggering a broader loss of faith in US assets.
Powell, for his part, has firmly defended the Fed’s independence. In remarks last week, he asserted, “We’re never going to be influenced by any political pressure… Our independence is a matter of law.” He also reminded that Fed governors “are not removable except for cause,” and emphasized the long, fixed terms that protect against political meddling. While the “cause” does not typically include policy disagreements, the intensifying standoff with the White House has cast a long shadow over US institutions. Ad for now, the markets appear to be voting with their feet—out of the Dollar and into alternatives.
Euro has emerged as the biggest gainer in today’s subdued session, extending recent strength as investors seek refuge in the most liquid and viable alternative to Dollar. With its deep capital markets, relative political stability, and credible central bank, Euro is increasingly seen as a safer store of value amid the implosion of confidence in US governance. Other safe havens like the Japanese Yen and Swiss Franc are also holding firm, but it is Euro and Gold that are leading the charge.
Gold prices have surged to fresh record highs, fueled by a flight to safety and fears of policy instability. Technically, Gold is still in upside acceleration as suggested in D MACD. Despite overbought condition, there is no sign of topping yet. Decisive break of 161.8% projection of 2293.45 to 2789.92 from 2584.24 at 3387.52 will pave the way to 200% projection at 3577.18 next. Outlook will stay bullish as long as 3167.60 resistance turned support holds, in case of retreat.
China holds benchmark lending rates steady
China kept its benchmark lending rates unchanged for the sixth consecutive month today. One-year loan prime rate was held at 3.1% and the five-year LPR steady at 3.6%.
Subdued domestic inflation and growing global trade headwind, particularly the latest wave of tariff threats from the US, argue in favor of further policy easing However, PBoC appears reluctant to move ahead of Fed.
A premature rate cut could exacerbate downward pressure on the yuan, fueling capital outflows and financial instability.
April PMIs to gauge global business fallout from tariffs
The spotlight in the coming week will be on the flash PMI readings for April, covering major economies including Australia, Japan, the Eurozone, the UK, and the U.S. These surveys will serve as a timely barometer for assessing how global business conditions have responded to the surge in trade tensions following US President Donald Trump’s “Liberation Day” tariff announcement earlier this month.
March PMIs had already reflected some of the early impact of trade policy uncertainty, particularly in North America. Notable takeaways included rising manufacturing input costs in the US and early signs of softening trade flows.
The upcoming data will be critical in identifying how deeply those measures are now affecting business conditions. Analysts will be watching for deterioration in new orders, delivery times, and price components—key indicators of disrupted supply chains and cost pass-through.
Beyond the PMIs, a series of supporting data will also shape market sentiment. US durable goods orders will be closely watched for signs of weakening beyond autos. Germany’s Ifo business climate and expectations index will give a read on sentiment in Europe’s largest economy. Additionally, retail sales data from both the UK and Canada could reflect how consumers are responding to expected price shifts and economic uncertainty.
Here are some highlights for the week:
- Monday: China loan prime rate decision.
- Tuesday: Canada IPPI and RMPI; Eurozone consumer confidence.
- Wednesday: Australia PMIs; JapanPMIs, tertiary industry index; Eurozone PMIs, trade balance; UK PMIs; US PMIs, new home sales, Fed’s Beige Book.
- Thursday: Japan corporate service prices; Germany Ifo; US jobless claims, durable goods, existing home sales.
- Friday: Japan Tokyo CPI; UK Gfk consumer sentiment, retail sales; Canada retail sales.
EUR/USD Daily Outlook
Daily Pivots: (S1) 1.1314; (P) 1.1363; (R1) 1.1449; More…
EUR/USD’s rally resumed by breaking through 1.1472 today and intraday bias is back on the upside. Current rise from 1.0176 should target 161.8% projection of 1.0358 to 1.0953 from 1.0731 at 1.1694 next. On the downside, below 1.1357 minor support will turn intraday bias neutral and bring consolidations again, before staging another rally.
In the bigger picture, rise from 0.9534 long term bottom could be correcting the multi-decade downtrend or the start of a long term up trend. In either case, further rise should be seen to 100% projection of 0.9534 to 1.1274 from 1.0176 at 1.1916. This will now remain the favored case as long as 55 W EMA (now at 1.0776) holds.
