Dollar hits 3-year low, Dow slips 2% as Fed’s independence escalates

US President Donald Trump‘s renewed attacks on Federal Reserve Chairman Jerome Powell and the central bank’s independence are stirring market uncertainty, contributing to the US dollar hitting a three-year low.
The ICE U.S. Dollar Index, which tracks the greenback against a basket of major foreign currencies, fell to 97.92 on Monday, marking its lowest level since March 2022, according to FactSet data.As of 10:00 a.m. ET, the index was down 1.1% on the day, trading at 98.24.
Investors, grappling with trade tensions and Fed policy concerns, are increasingly turning to alternative safe-haven assets, like gold, which surged to a record high on Monday.
As of 10:54 AM GMT-4 on April 21, U.S. stock markets experienced significant losses, with the Dow Jones Industrial Average (DJIA) dropping 834.74 points, or 2.13%, to 38,307.49. The Nasdaq Composite declined by 425.39 points, or 2.61%, to 15,861.05, and the S&P 500 fell 118.24 points, or 2.24%, to 5,164.46. In contrast, gold prices surged, rising by 102 points, or 3.06%, to reach 3,430.4,
Trump lashed out at Powell on social media again on Monday, calling him a “major loser” and demanding that the Fed cut interest rates. The President’s attacks came after comments from Kevin Hassett, Director of the National Economic Council, who revealed last week that the Trump administration was “studying” the possibility of removing Powell.
Hassett noted that “new legal analysis” would be necessary before deciding whether Trump could or should terminate the Fed chief, marking a shift from his earlier stance of supporting the Fed’s independence.
While experts argue that Trump likely lacks the authority to dismiss Powell over policy differences, especially with the central bank’s long-standing independence, the President’s willingness to break norms and confront the Fed signals potential turbulence for US markets.
Powell himself, who was appointed by Trump in 2018, acknowledged the significant economic risks posed by Trump’s trade tariffs. Speaking at an event in Chicago last week, Powell warned that the tariffs, unprecedented in their scale, could stoke inflation and dampen growth, complicating the Fed’s ability to cut rates to support the economy.
Concerns over the Fed’s independence and Trump’s ongoing trade war are fuelling market jitters, with analysts warning that investors may begin losing confidence in the US financial system.
Jonas Goltermann, senior markets economist at Capital Economics, noted that Trump’s criticism of Powell serves as a reminder that trade policy is not the only avenue through which unconventional presidential actions could undermine the dollar and US markets, as per CNN report.
Indeed, the dollar has faced significant pressure this year, falling to 140.76 yen — its weakest level since September. Analysts are attributing this decline to growing investor unease over the Trump administration’s economic policies, including its ongoing trade war and tariffs. While the US dollar traditionally benefits in times of market volatility, the flight from the dollar, alongside a lack of progress on trade talks, is signalling broader concerns about the stability of the US economy.
The yield on the 10-year US Treasury note also rose on Monday, reaching 4.365% after a public holiday on Friday. With the Fed’s upcoming meeting in early May, traders are keenly watching whether the central bank will make any adjustments to interest rates amid the growing uncertainty. According to the CME FedWatch tool, 88% of traders expect the Fed to maintain current rates.
As Trump’s trade war and tariffs continue to dominate headlines, European markets are becoming increasingly attractive to investors, who view the US dollar and US assets as more uncertain.
Meanwhile, gold continues to see robust demand as a safe haven, with prices surging more than 2% on Monday to hit a fresh record high of over $3,400 per ounce. Gold has been on an impressive rally this year, up more than 27% so far, outpacing its performance throughout 2024.
The earnings season is also in full swing this week, with investors looking closely at the first-quarter results from major tech firms. Tesla, which will release its earnings on Tuesday, and Alphabet, set to report on Thursday, are expected to offer insights into how companies are navigating the uncertain economic landscape shaped by tariffs and trade tensions.
As the global economic environment remains volatile, analysts, including Sam Stovall, chief investment strategist at CFRA Research, expect that tariff concerns will remain a dominant theme in the coming months, even as investor attention shifts to corporate earnings.