Dollar Holds Ground Despite Powell Rumors. Forecast as of 17.07.2025
The rehearsal of Jerome Powell’s removal from the position of Fed Chair went well. The “sell American” slogan played out in full. But once again, Donald Trump stepped back, and TACO — “Trump Always Chickens Out” — brought EURUSD back to its previous level. Let’s discuss it and make a trading plan.
The article covers the following subjects:
Major Takeaways
- Rumors of Powell’s dismissal crashed the dollar.
- Donald Trump calmed the markets.
- Loss of trust in the greenback matters more than the Fed’s inaction.
- Buying EURUSD from 1.1645 remains relevant.
Weekly Fundamental Forecast for Dollar
People get used to anything, especially if they’re prepared in advance. Markets were shocked on Independence Day because of tariffs. They were shocked again when news leaked that Donald Trump would likely try to remove Jerome Powell. But the scale was very different. In the first case, the S&P 500 and USD crashed. In the second, markets saw a rollercoaster ride. The reason lies in long-term preparation.
When an accident happens on the highway, cars slow down, drivers shake their heads, and take a moment to reflect. However, the shock soon fades, and traffic returns to normal. Speeds pick up, and life moves on. Markets work the same way. They adapt to new realities. Investors are no longer scared by 30% tariffs against the EU or 50% against Brazil. They’ve gotten used to it. That’s why the weak reaction to Trump’s idea to fire Jerome Powell shouldn’t come as a surprise.
Was this a rehearsal of the Fed Chair’s dismissal? Possibly. However, Deutsche Bank recently stated that if this were to happen, the US dollar could fall by 3–4% within 24 hours. In reality, the drop was much smaller. Markets have become thick-skinned, or they just don’t believe Powell will actually be dismissed. According to Polymarket, the odds of such an outcome are just 25%.
Odds of Jerome Powell’s Dismissal
Source: Bloomberg.
However, Donald Trump once again demonstrated his ability to manipulate the markets. He used TACO to convince investors that even if Powell leaves, there’s nothing to fear. According to Trump, the White House isn’t planning to fire the Fed Chair. He thinks it’s unlikely, though he doesn’t rule it out. If Powell leaves, it will only be due to fraud.
Market Reaction to Powell Dismissal Rumors
Source: Bloomberg.
This statement came after the media leaked the rumor about Trump’s intent to remove Powell. Trump explained it by saying he had asked his team what they thought about firing the Fed Chair. He added that he is more conservative than the rest of his administration.
The less the market believes the Fed Chair will be fired, the more likely it is to happen. But what would change? The Fed isn’t a one-man show, and dictatorship doesn’t work there. Keeping rates high is still a good reason to buy the greenback. However, the White House’s attacks on the Fed increase demand for hedging among foreign investors. According to Morgan Stanley, if European investors increase their hedging of US assets by $400 billion, EURUSD could rise to 1.30.
Weekly Trading Plan for EURUSD
The loss of trust in the US dollar seems to be more important than the Fed’s inaction. Moreover, the Fed could already signal a rate cut for September during the July meeting. That makes buying the euro from $1.1645 an attractive idea.
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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