USD: The battle for the Fed continues - Commerzbank

The dispute over Lisa Cook, the Fed governor dismissed by Trump, continued yesterday. The US Vice President emphasised that Trump should have the right to dismiss governors. Kevin Hassett, one of the candidates to succeed Jerome Powell as Fed chair, suggested that Cook take a temporary break while the ongoing proceedings against her for alleged fraud were ongoing. Given the statements made by Trump loyalists, one can't help but wish that they would apply the same standards to their own loyalists, Commerzbank's FX analyst Antje Praefcke notes.

Battle for Fed independence has only just begun

"This does not mean that Cook should remain in office if she is found guilty of fraud. However, these are merely allegations made by another extremely loyal Trump supporter (who, strangely enough, must have been closely involved in the activities of Fed officials). So far, nothing has been proven, and no proceedings have concluded. My colleague Volkmar emphasised last week that the offence Cook is accused of is widespread. Yesterday, there were also reports that Cook would soon be filing a lawsuit against her dismissal. That is likely to keep the courts busy for a while."

"When we recently expressed concern about the independence of the Fed in the context of attacks on Jerome Powell, we were often told that Powell only had one vote and that it would therefore not be so bad for the USD. The battle over Lisa Cook makes it clear that this is unlikely to be the end of it. A few days ago, Trump posted a picture dividing decision-makers into Trump loyalists (Waller, Miran and Bowman) and Biden candidates (Jefferson, Barr and Powell)."

"Setting aside the fact that Powell was appointed by Trump and only confirmed in office by Biden, the attacks on Cook and Powell are likely to extend to other candidates who oppose interest rate cuts. Not to mention that the Trump administration is seeking to gain more influence over the appointment of regional Fed chiefs, with the aim of appointing more decision-makers in line with its agenda. Clearly, the battle for Fed independence has only just begun."