Elias Haddad, a strategist at Brown Brothers Harriman, said, "The credibility of U.S. policymaking is increasingly under threat."

Haddad believes the dollar is vulnerable to further downside pressure—Trump's pressure on Powell and his colleagues to cut rates has "undermined the Fed's independence," while the dismissal of McEntarfer "risks damaging perceptions of the integrity of U.S. economic data."

Macro strategist Mark Cudmore pointed out, "The market cannot interpret President Trump’s firing of the Bureau of Labor Statistics chief in a positive way—either, as Trump claims, U.S. data was previously distorted, or the reliability of the data was at the highest achievable level but is now politicized. In either case, the credibility of future data releases has been weakened, and U.S. assets should face higher risk premiums."

Derek Halpenny, Global Head of Markets Research at MUFG in London, said that among the currently speculated candidates to replace Powell, selecting National Economic Council Director Kevin Hassett would be "the worst choice for the dollar due to his close ties to the president."

Halpenny added that Treasury Secretary Bessent would also be viewed negatively by investors due to his association with Trump, though the threat level is lower than with Hassett.

In contrast, Halpenny noted that former Fed Governor Kevin Warsh and current Fed Governors Waller and Bowman would be viewed more positively due to their Fed experience.

In any case, with August’s thin liquidity due to investor vacations, the nomination of a Fed governor (or quasi-chair) is a risk event for markets. Trump said on Sunday that he plans to announce replacements for Kugler and McEntarfer in the coming days.

"The dual turnover of a Fed governor and the BLS chief could ultimately impact the financing of the U.S. twin deficits (fiscal and trade)," said a Deutsche Bank team led by Jim Reid. "Unless a significant economic slowdown occurs, this could hinder the rise of U.S. long-term bonds."