Monex: Dollar bears return, market bets on September rate cut and Fed independence under pressure

Helen Given, head of trading at Monex USA, made a strong comeback today in the wake of Powell's speech in Jackson Hole and Trump's threat to fire Federal Reserve Governor Tim Cook. The first substantive move came naturally when Powell pointed out that downside risks to the job market were gaining weight in the Fed's decision-making. The reaction we have seen in the foreign exchange market is directly related to the sharp increase in the probability of a 25 basis point rate cut in September, because Powell decisively opened the door to it today. Traders also see a good chance of a further 25 basis point rate cut this year, and the overnight swap market is betting heavily for the first time that there will be significant easing in the first half of 2026. Mr. Trump's comments to Mr. Cook have reignited concerns about the Fed's independence as it becomes increasingly clear that the administration wants to transform the central bank into what it wants it to be. If Mr. Trump gets the interest rate cuts he wants from Mr. Powell and his colleagues in the second half of the year, he may be able to stay on as chairperson for the rest of his term, but markets remain unconvinced that anything the Fed does this year will be enough to satisfy Mr. Trump.