The US dollar has fallen after Trump’s choice to remove Fed Governor Cook. This change has reduced the dollar’s value, which benefits gold, the euro, the yen, and the Swiss franc. In other updates, Trump is advocating for a 15-20% minimum tariff on all goods from the EU. He is also threatening tariffs against countries that impose digital taxes.

Chinese Trade Negotiator Visit

A senior Chinese trade negotiator will visit Washington for initial trade discussions. At the same time, the People’s Bank of China is expected to set the CNY/USD reference rate at 7.1670, according to a Reuters estimate. Overall, gold and several currencies are gaining as the US dollar continues to fall due to recent political changes. Political pressure on the Federal Reserve now brings extreme uncertainty for future policies. This situation is likely to lead to higher market volatility, similar to what we saw in the politicized atmosphere of the late 2010s. The VIX index has surged over 40% to 28.5, highlighting this unpredictable central bank environment.

Market Volatility and Dollar Weakness

Trust in the US dollar relies heavily on the credibility of its central bank, which is now in doubt. Expect further dollar weakness against major currencies. Recent data from the CME Group shows a 35% increase in net short positions on dollar index futures overnight. There’s also a noticeable rise in open interest for out-of-the-money EUR/USD call options, suggesting that the market is preparing for a significant increase in this currency pair. Capital is moving towards traditional safe havens, which has been a trend during major crises, from the 2008 crash to the 2020 pandemic. Gold futures have already surpassed the important $2,500 per ounce resistance level, a price point that has held steady for most of 2025. Using call options on gold or put options on pairs like USD/JPY can offer leveraged exposure to this move towards safety. The market will be very sensitive to any comments from remaining Fed officials and upcoming inflation data. Any changes from previous guidance could lead to sharp market moves, making short-dated options strategies like straddles particularly appealing around key economic announcements. For example, the next Personal Consumption Expenditures (PCE) inflation report could spark another wave of selling for the dollar. Create your live VT Markets account and start trading now.

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