Wall Street discusses "Trump fires Cook": The independence of the Federal Reserve is in danger! Bad dollar, good for gold and Bitcoin

# Author: Li Xiaoyin  

# Source: Wall Street CN  

According to CCTV News, on local time August 25th, U.S. President Trump publicly released a letter to Federal Reserve Governor Lisa Cook on his social media platform "Truth Social," announcing her immediate removal from office.  

As Wall Street CN previously analyzed, if Cook steps down, Trump could gain four seats on the Federal Reserve, bringing him one step closer to "taking control of the Fed."  

Since the market widely expected Trump to appoint a more dovish candidate to replace Cook, following the news, the U.S. dollar weakened across the board, short-term U.S. Treasury yields fell, and safe-haven assets such as gold and Bitcoin were sought after by investors.  

Analysts generally believe that this move has undermined market trust in U.S. core financial institutions and may pose a long-term challenge to the U.S. dollar’s status as the global reserve currency. Investors are re-evaluating the risks of the U.S. market and shifting their focus to traditional safe-haven assets like gold and the Japanese yen, as well as cryptocurrencies.  

## Alarm Raised Over Federal Reserve’s Independence  

Trump’s action has once again sparked external doubts about the Federal Reserve’s independence.  

Tony Sycamore, Market Analyst at IG, pointed out:  

"Following Trump’s pressure on Federal Reserve Chair Jerome Powell last week— which led to Powell’s acquiescence—Trump has now removed Cook from office. This once again raises questions about the Fed’s independence and further weakens its ability to maintain impartial monetary policies free from political influence."  

Kyle Rodda, Senior Financial Markets Analyst at CAPITAL.COM, stated bluntly:  

"What is worrying is the intent of the Trump administration: it is not to safeguard the integrity of the Federal Reserve, but to place Trump’s own people within the Fed."  

"This circles back to the issue of trust in institutions... This is another crack in the edifice of the U.S. and its investability."  

Shoki Omori, Chief Strategist at Mizuho Securities, also expressed the same view:  

"This looks bad. The Federal Reserve no longer resembles an independent institution. A loss of confidence in the Fed could also lead to a loss of confidence in the U.S. dollar."  

Bart Wakabayashi, Manager of State Street’s Tokyo Branch, was even more forthright:  

"All of this—including tariff policies—adds another reason why the U.S. cannot be trusted."  

"There is no stability, no credibility. And these are the very foundations that make the U.S. the world’s safest investment destination. If you are a responsible investor, this makes you pause and think."  

## U.S. Dollar Under Pressure; Safe-Haven Assets Sought After  

In terms of asset impact, apart from concerns about the erosion of the Fed’s independence, the market also widely expects the White House to nominate a more dovish candidate to fill the vacancy—both factors directly weighing on the U.S. dollar.  

Christopher Wong, FX Strategist at OCBC Bank, stated that Trump’s move is "another example of concerns over Fed independence weighing on the dollar" and may lead to more dovish members joining the Federal Open Market Committee (FOMC), thereby "increasing expectations of interest rate cuts and a weaker dollar."  

Carol Kong, FX Strategist at Commonwealth Bank of Australia, believes that dismissing Cook is just another attempt by Trump to influence FOMC decisions. She said:  

"As seen from the dollar’s decline against other major currencies, this development is clearly negative for the dollar, as it creates a new opportunity for Trump to install another dovish governor on the FOMC."  

Thomas Mathews, Head of Asia-Pacific Markets at Capital Economics, noted that the market reaction has been relatively muted, but it provides an important clue about potential scenarios ahead:  

"A steeper yield curve, higher long-end yields, and a weaker dollar."  

Against this backdrop, demand for assets such as gold, the Japanese yen, and even Bitcoin is on the rise. Charu Chanana, Chief Investment Strategist at Saxo, said:  

"Gold and the yen are rising. Investors are not hedging against a single dismissal, but against the long shadow this casts over the Fed’s independence."  

Kyle Rodda also clearly pointed out:  

"This is positive for gold, and ultimately will also be positive for Bitcoin."  

## Markets Not Fully Pricing in Risks  

Despite the rapid market reaction, most analysts believe that the market has not yet fully digested all potential risks, and uncertainty remains high going forward.  

Thomas Mathews, Head of Asia-Pacific Markets at Capital Economics, observed that the initial market reaction was "quite muted," partly due to the timing of the news and uncertainty over whether Trump can successfully replace Cook. He believes:  

"The real drama may unfold when he continues to exert pressure after the easing cycle has clearly ended."  

The market has now raised expectations for further interest rate cuts in September and throughout the year. However, Shoki Omori of Mizuho Securities warned that the market has not yet priced in "the possibility that Trump may target other Federal Reserve officials."  

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