Global investors endured one of the most tumultuous nights this year as rumors about ousting Federal Reserve Chair Powell triggered seismic waves across financial markets. At 22:00 Beijing time, reports surfaced claiming Trump had consulted House Republicans about dismissing Powell, with several attendees allegedly endorsing the move. The New York Times further fueled speculation by asserting Trump had drafted a termination letter.
This triggered immediate market convulsions: gold prices skyrocketed, the dollar plunged to session lows, U.S. equities tumbled, and the 10-year Treasury yield spiked to 4.49%. Yet within sixty minutes, Trump emphatically denied both the dismissal plans and the letter's existence. Markets dramatically reversed: gold surrendered gains, the dollar rebounded, stocks recovered, and bond yields retreated to 4.45%.
This whiplash-inducing volatility revealed critical insights. First, the extreme market reaction to the initial rumor – which Trump couldn't afford to ignore – forced his rapid clarification. Second, whereas previous threats against Powell elicited muted responses, markets now perceive his removal as a credible danger. Such action would shatter Federal Reserve independence and ignite inflationary chaos, triggering deep-seated investor anxiety.
Third, this episode exposes Trump's tactical market manipulation. Legal constraints prevent Powell's actual dismissal, making this primarily a pressure tactic to influence monetary policy. By floating the threat, Trump aims to amplify rate-cut bets and force the Fed into accommodative moves – creating a self-fulfilling prophecy. The maneuver echoes his tariff announcement strategy, where mere speculation triggers immediate volatility.
Ultimately, this represents another Trump-led market intervention experiment, demonstrating how deliberately manufactured headlines can generate destabilizing turbulence for traders attempting to navigate the chaos.
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