On Wednesday (August 20), the dollar fell as President Trump demanded the resignation of Federal Reserve Governor Lisa Cook. The currency market, already highly sensitive to political interference in the Fed, was thrown into turmoil again. Any hint of a threat to the Fed’s independence triggers automatic selling mechanisms, and algorithm-driven sell-offs surged. However, the decline gradually narrowed as the FOMC meeting minutes revealed that only two policymakers supported a rate cut last month.

The issue is not only that Cook’s mortgages in Michigan and Georgia were dragged into a political whirlpool but also that markets widely fear Trump is attempting to tighten his grip on the Fed. There are even rumors that he is considering directly firing Cook. The foreign exchange market is all too familiar with such drama: any threat to the Fed’s independence is never trivial. Traders instinctively sell dollars, fearing monetary policy could become a political tool of the White House.

Trump has long complained about Powell’s slow pace of rate cuts, and the financial world is already betting that Trump may appoint a more dovish successor after Powell’s term ends in May. However, the nuance lies in the fact that even if he loses the chairmanship, Powell can remain as a governor. This means Trump’s ability to steer the Fed fully toward a dovish stance may be more limited than it appears. This checks-and-balances risk has eased market anxiety.

For now, traders must strike a balance between political games and market mechanisms. Market trends show algorithms are on high alert—whenever “Trump” and “Fed independence” appear together, the dollar is inevitably impacted. But the real battle lies in who will dominate the interest rate trajectory in 2025: Powell’s steady control or Trump’s push for looser monetary policy. Until then, every headline is like rolling another loaded dice in the forex trading hall.