Dollar Drifts Lower Amid Anti-Fed Headlines. Forecast as of 21.08.2025
Donald Trump has put pressure on the Fed at just the right time. Jerome Powell is expected to deliver moderately hawkish rhetoric at the Jackson Hole conference. This has given EURUSD bears more room for maneuver. The US administration has limited their ability to act. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Trump calls on FOMC member Lisa Cook to resign.
- Pressure on the Fed has erased the dollar’s gains.
- The US central bank is not going to cut rates aggressively.
- Short trades on the EURUSD pair can be considered if the price settles below 1.165.
Weekly US Dollar Fundamental Forecast
The Fed is like the Vatican; it has power but lacks an army. The central bank manages a colossal $30 trillion economy, but anyone can throw stones at it. Donald Trump has not given up hope of turning the Fed into a puppet of the US administration, calling on FOMC member Lisa Cook to resign for alleged mortgage fraud. Otherwise, the US president will do everything possible to dismiss her. At the same time, EURUSD bears were forced to retreat.
Donald Trump understands that putting pressure on Jerome Powell will lead to nothing. The Fed chairman wants to make history, not get into trouble like his predecessor, Arthur Burns. The US regulator makes decisions collectively, so the best way to influence its decisions is to reshuffle the FOMC. Adriana Kugler’s resignation allowed the US administration to promote Stephen Muran. Christopher Waller and Michelle Bowman are already on board. All that remains is to put pressure on the rest of the hawks.
The US dollar is exhibiting signs of volatility in response to the president’s recent comments. The erosion of confidence in the Fed, coupled with lower rates even against a backdrop of high inflation, will likely support the EURUSD pair. President Trump’s recent criticism of Lisa Cook was strategically timed. Investors have started to return to the greenback amid a reduction in the Fed’s expected monetary expansion.
Market Expectations on Fed Rate
Source: Bloomberg.
According to the minutes of the most recent Federal Open Market Committee meeting, in July, the majority appeared to prioritize addressing rising inflation over the cooling of the labor market. Many anticipated that the coming months would provide the central bank with valuable insights, suggesting that the pause will persist. The doves argued that there was no need to wait for the tariffs to affect prices, so that action should have been taken.
As time has passed, the situation has evolved significantly. The employment data for May and July were so weak that they led to the resignation of the head of the Bureau of Labor Statistics. The markets then saw consumer prices stabilize, followed by producer prices accelerating to a three-year high. The likelihood of a federal funds rate cut in September has decreased from nearly 100% to 82%. The US dollar demonstrated resilience, regaining its footing and mounting a counterattack. In addition, Donald Trump’s recent actions have presented a new challenge for the Fed.
US Nonfarm Payrolls and PCE Index
Source: Bloomberg.
The more pressure from the US administration, the less desire the Fed has to cut rates. Jerome Powell’s moderately hawkish rhetoric in Jackson Hole will open the door for a correction in the EURUSD pair.
Weekly EURUSD Trading Plan
The medium- and long-term outlook for the major currency pair remains bullish. Therefore, it is important to identify a reversal to close short-term short positions opened at 1.165. Will the EURUSD pair slide to 1.155 and 1.15?
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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