British Pound Slides after Trump Refutes Fed Chair Removal
The British pound traded around $1.339, near an eight-week low, mainly due to renewed strength in the US dollar as Washington allayed fear of Fed chair removal.
The market saw an increase in demand for dollar while companies closed options previously hedged against the world dominant currency in the forex market.
Dollar index (DXY) regained strength as investors’ sentiment fuel renewed interest in dollar positions. Hence, the dollar rose to a three-week high after former President Trump said he had no plans to fire Fed Chair Jerome Powell, despite criticizing the Fed for being too slow to cut interest rates.
Any move by the White House to remove Fed Chair Powell is likely to be very damaging for USD, says Sean Callow, market strategist at InTouch Capital Markets.
Such a move may drive down short-end yields in anticipation of the appointment of a more dovish central bank head and add risk and inflation premiums to longer-dated U.S. debt, he says in a note.
In the UK, investors are weighing recent jobs and inflation data for clues on monetary policy.
The labour market continues to soften, with payroll employment falling again, though revised tax data suggests the decline is less severe than previously thought.
Unemployment rose to 4.7%, while wage growth—though still historically strong—showed signs of slowing. Meanwhile, inflation surprised to the upside in June, coming in at 3.6% versus a 3.4% forecast. The mixed signals create uncertainty for the Bank of England.
Slower wage growth supports potential rate cuts, but sticky inflation could delay them. Traders have slightly scaled back expectations but still price in two cuts in 2025. #British Pound Slides after Trump Refutes Fed Chair Removal#
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