And—you guessed it—the person responsible is President Donald Trump. 

He dinged another 0.3% off the dollar in the last 24 hours, according to the Financial Times, after the Wall Street Journal reported that Trump is considering naming a replacement for U.S. Federal Reserve Chairman Jerome Powell as soon as September. Powell’s term is up in May—and having a named replacement looming in the background would severely undermine him.

That’s a problem for investors, who regard Powell as a serious, cautious economist who operates independently of Trump’s political desires. 

Convera’s Antonio Ruggiero told clients this morning: “The fleeting support for the greenback, born of geopolitical tensions and its traditional safe-haven appeal, has all but evaporated… Layered on top of this is a political catalyst: A Wall Street Journal report indicated that President Donald Trump may fast-track the appointment of the next Federal Reserve Chair—fueling speculation of an accelerated rate-cutting cycle…so dollar negatives are stacking up.”

Trump hates Powell because Powell has declined to lower interest rates. In a series of posts on Truth Social, Trump has repeatedly insulted Powell and called him names. Powell is a “very dumb, hardheaded person,” Trump’s most recent post said. “We will be paying for his incompetence for many years to come.”

Powell is in a tight spot because the U.S. rate of inflation is still above 3%. In fact, Trump’s tariff policy is generally regarded as inflationary because it increases the price of imported goods. The Fed’s target rate is 2%. If Powell lowers rates (currently at 4.25%), it would, in theory, make inflation even worse. 

It’s likely that Trump would want assurances that his next pick for the Fed would lower interest rates. The dollar’s decline is therefore a sign that investors are nervous that U.S. monetary policy might end up in the hands of someone who doesn’t understand, or care, how inflation works. 

That could set up an extraordinary conflict between the Fed chair and the rest of the Federal Open Markets Committee, which sets the target interest rate, according to a note published by UBS analyst Paul Donovan this morning.

“Only convention prevents the Fed from overruling the Chair—an obvious political appointee may be ignored by the FOMC. The greatest threat to policy independence would be someone who was not an obvious political puppet but was swayed by Trump’s instructions,” he said.

And then there is the bond market. The FT reported this morning that investors are fleeing long-dated U.S. bonds because they fear that Trump’s “One Big Beautiful Bill” will add more federal debt than the U.S. economy can support.

Net outflows from long-dated bonds hit $11 billion in Q2, “the swiftest rate since the height of the COVID-19 pandemic five years ago as America’s soaring debt load tarnishes the appeal of one of the world’s most important markets,” the paper reported.

The bond market supports the value of the dollar. If bond prices decline, the USD will follow.

“It’s a symptom of a much bigger problem. There is a lot of concern domestically and from the foreign investor community about owning the long end of the Treasury curve,” Bill Campbell of DoubleLine told the FT.

Stocks, meanwhile, are ignoring all this drama. The S&P 500 looks poised to make another assault upon its all-time high of 6,144.15 today. S&P 500 futures were trading up 0.36% at the time of writing.

Here’s a snapshot of the action prior to the opening bell in New York:

• The S&P 500 closed flat at 6,092 last night. 
• S&P futures were up 0.36% this morning.
• Stoxx Europe 600 was up 0.23% in early trading.
• Bitcoin was above $107K this morning.
• Japan’s Nikkei 225 was up 1.65%.
• India’s Nifty 50 was up 1%. 
• China, Hong Kong, and South Korea’s main indexes were all marginally down.