Trump could target three Fed governors. Removing them may be harder than it looks
In a surprising political maneuver, former President Trump may seek to remove three Federal Reserve governors—Jerome Powell, Lisa Cook, and Michael Barr. This potential shake-up is noteworthy, as it underscores ongoing tensions between the Fed and political entities regarding monetary policy. The implication of such changes could stir volatility in USD markets, raising questions about the Fed’s future guidance and maintaining market stability amidst rising interest rates.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The insights from current reports suggest that the market is increasingly attentive to political influences on monetary policy as the Fed navigates economic challenges.
How firms align
JPMorgan aligns with the potential impact of political shifts by maintaining a target of 1.10, suggesting a favorable outlook on EUR/USD should governance be stable. Meanwhile, BofA takes a contrary position with a more cautious 1.04 target, reflecting concerns over potential instability stemming from these political maneuvers. Internal updates suggest firms are split on the implications of Fed leadership changes.
What the data shows
Recent analyses indicate volatility in FX setups as market participants anticipate further Fed actions amid external pressures. Our ongoing research emphasizes the importance of Fed governance in shaping economic sentiment, especially in light of the proposed changes, explored further in /research/fed_leadership_impacts.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Trump's potential Fed shake-up adds uncertainty for USD.
- 02EUR/USD traders should prepare for governance-related volatility.
- 03Watch for guidance shifts if Powell, Cook, or Barr are removed.
Market implications
Traders should monitor the EUR/USD around critical support at 1.070, with upcoming Fed announcements likely influencing market positioning. Our consensus of 1.075 reflects a cautious outlook that could shift with political developments.
Risks to this view
Should Trump succeed in ousting Fed governors, instability could lead to a bearish outlook on USD. Market reactions would need close monitoring, particularly around Fed meetings or announcements regarding policy direction.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.60
Sources & References
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