**U.S. Dollar Retreats After Fed’s Cook Fired: Detailed Analysis for EUR/USD, GBP/USD, USD/CAD, USD/JPY**
*By James Hyerczyk, originally published on FX Empire*
The U.S. dollar experienced a notable downturn in the forex markets amid heightened political drama and economic repercussions. Former President Donald Trump’s move to fire Federal Reserve Governor Lisa Cook sent shockwaves through financial markets, rekindling concerns over the perceived independence of the central bank and triggering a cautious stance among traders and investors.
This article elaborates upon the events that have led to the greenback’s slide, offers an in-depth technical and fundamental analysis across the major currency pairs including EUR/USD, GBP/USD, USD/CAD, and USD/JPY, and provides additional global market context to understand how political instability influences forex activity.
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### Market Reaction to Lisa Cook’s Dismissal
In an unexpected development, former U.S. President Donald Trump, in campaign rhetoric and interviews, suggested he might remove Federal Reserve officials, including Governor Lisa Cook, if re-elected. Though not an official action, Trump’s statements have intensified fears among market participants about the politicization of the Fed and its policy decisions.
Key reactions from the market:
– The U.S. dollar index (DXY), which tracks the dollar against a basket of six major currencies, declined following the remarks.
– Investors moved away from the U.S. dollar toward safer assets, reflecting concern over central bank independence.
– Short-term yields on U.S. Treasury bonds dipped slightly as traders recalibrated interest rate expectations with growing uncertainty about Fed leadership in a potential Trump-led administration.
The implication of Cook’s perceived dismissal, even if only hypothetical at this stage, is profound. Governor Cook has been seen as a moderate voice on the Federal Reserve Board, often supporting Chair Jerome Powell’s balanced approach to managing inflation and employment.
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### Macroeconomic Context Impacting the USD
Beyond the political angle, there are several macroeconomic issues contributing to the dollar’s weakness:
– **Inflation Trends**: The U.S. Consumer Price Index (CPI) data recently revealed stickier-than-expected inflation. Though this initially supported the dollar, the uncertainty about Fed leadership has now taken center stage.
– **Interest Rate Speculation**: Markets had been pricing in rate cuts later in 2024 due to an expected slowdown in economic growth. The political developments have now reignited speculation of either more dovish policy changes or the risk of abrupt shifts in central bank actions.
– **Economic Performance in Overseas Markets**: Stronger-than-expected economic data from Eurozone and the UK contributed to pressure on the dollar, especially against the euro and pound.
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### Technical Analysis: Major Currency Pairs
#### EUR/USD: Dollar Weakness Inflates the Euro
Following the news, the EUR/USD rallied to near resistance around 1.0850, marking an uptick driven by both dollar softness and resilient European data.
Bullish indicators for EUR/USD:
– The pair broke through its 50-day moving average, signifying upward momentum.
– RSI remains below overbought territory, suggesting room for additional gains.
– December’s flash PMI data for the Eurozone beat expectations, particularly in services.
Near-term resistance and support levels:
– Resistance: 1.0850, followed by 1.0900
– Support: 1.0780, with stronger support at 1.0720
Euro traders are watching ECB signals closely. Although inflation has eased, rate cuts are likely to be moderate compared to what is priced in for the Fed, offering tailwinds for the EUR/USD pair.
#### GBP/USD: Pound Strengthens Amid Policy Clarity
The British pound advanced against the weaker greenback, with GBP/USD moving above the 1.2700 handle. Unlike the Fed, the Bank of England (BOE) has been transparent in advocating for a cautious approach toward monetary easing, which is helping to support
Read more on USD/CAD trading.