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    Trump is ready for legal challenges, discusses potential Fed board replacements, and critiques its political nature.

    by VT Markets
    /
    Aug 26, 2025
    Trump hinted at a possible legal challenge involving the Federal Reserve. He expressed a willingness to change the Fed board, including replacing Fed member Cook. He wants lower interest rates and is hopeful about upcoming leadership changes. Trump expects to have a majority on the Federal Reserve Board soon.

    Federal Reserve Independence

    He has criticized the Fed for being too political. There are also talks of moving Miran to a long-term position within the Fed. These remarks create uncertainty around the Fed’s independence. History shows that such uncertainty often leads to higher market volatility. The VIX, which was near 16, has risen above 22, indicating that traders are expecting more risk in the coming weeks. Trump’s goal to “get rates down” will directly affect interest rate futures. The market now sees a much higher chance of a rate cut before the end of 2025. December SOFR futures now suggest a 70% likelihood of a cut, up from just 40% last week. This is surprising given recent data, such as the July 2025 CPI, which was a steady 3.2%.

    Impact on the US Dollar

    The pressure from politics and the chance of forced rate cuts may weaken the US Dollar. A less independent central bank can shake foreign investor confidence. We should look out for downward trends in the Dollar Index (DXY), which may make options betting against the dollar more appealing. We can take lessons from the early 1970s, when political pressure on the Fed led to severe inflation later on. This history suggests that traders should keep an eye on derivatives linked to long-term inflation expectations, as they might become much more volatile if the market doubts the Fed’s ability to control inflation. Create your live VT Markets account and start trading now.

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