Trump's attempt to intervene in Fed management shakes markets: Fed independence is back on the agenda

Investing.com - US President Donald Trump's attempt to dismiss Lisa Cook, a member of the Fed Board, has resonated widely in both markets and political circles. This attempt went on record as the first case in which a US president tried to directly dismiss an incumbent Fed executive.

Cook, speaking after Trump's letter to Cook stating that he was terminating his post immediately, argued that the president had no constitutional or legal authority over the matter. Cook said he would not resign and said he would continue to work for the American economy as he has since 2022.

Sycamore: The serious danger to the independence of the Fed

IG Market Analyst Tony Sycamore said Trump's decision to impeach Cook was a worrisome development regarding the Fed's independence. Sycamore stressed that this action was a direct intervention in the autonomy of the central bank, an unprecedented step.

Recalling that Cook tends to vote mostly together on the Federal Open Market Committee (FOMC), Sycamore pointed out that his dismissal could increase the chances of the Fed cutting interest rates in September in the short term. He predicted that this possible interest rate cut could create pressure on the US dollar and provide support for stocks and other risky assets such as Bitcoin.

Eslake: US institutions and the “America Brand” under total attack

Saul Eslake, former chief Australian economist at Merrill Lynch, said that President Trump's move was a clear escalation of the White House's influence over the Fed. Eslake pointed out that loyalty was made a criterion in the restructuring of US federal agencies.

Eslake recalled that the Fed's independence is the basis for U.S. Treasury bonds and the dollar's global safe-haven status. Emphasizing that these fundamental structures are under threat, Eslake said that national trust, which he described as the “brand of America,” was compromised in many aspects, and said there would be no positive outcome from this process.

Market Reaction: Gold rises, dollar weakens

After Trump announced that he would remove Cook, there was a sharp reaction in the financial markets. Gold prices rose as the US dollar depreciated. Buoyed by the rise in safe-haven demand, spot gold rose to its highest level since Aug. 11 earlier in the session.

Ounces of gold rose 0.84% to $3,386 in the early hours of the day. The price of gold, which loosened somewhat in the following hours, fell as low as $3.375. Tim Waterer, Chief Market Analyst at KCM Trade, said Trump's statements created uncertainty among investors, which increased the trend directly to the bottom.

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