Above: President Donald Trump's tour of the Fed renovations led to a temporary detente. But this has ended. Official White House Photo by Daniel Torok.
A multi-pronged and concerted effort by the U.S. administration to lower interest rates is underway.
The Dollar has come under sustained pressure in the wake of on-target CPI inflation numbers; however, the real story for the U.S. currency is occurring in the political sphere, where risks are bubbling.
Over the past 12 hours we have witnessed: another attack on Federal Reserve Chair Jerome Powell, threats to discontinue monthly labour market data and pressure from a senior White House appointee to push the Federal Reserve into an outsized cut.
The latter being Treasury Secretary Scott Bessents comments to Fox Business that the "Fed could have been cutting in June, July" had it had the revised labour market figures in hand at the time of the July policy meeting.
He also said that "The real thing now to think about is should we get a 50 basis-point rate cut in September."
Lower interest rates are expected to help President Donald Trump and his team's political fortunes, but risks seriously undermining confidence in institutions, economic precendent and the Dollar.
"USD traded under pressure overnight post-CPI release and on comments from Treasury Secretary Scott Bessent," says Frances Cheung, FX and Rates Strategist at OCBC. "A September cut is more or less a done deal while there may be speculation for 50bp cut."
Rising odds for a 50 basis point cut would understandably weigh on the Dollar, as this is consistent with an orthodox market reaction.
However, it is the assault on financial orthodoxy by the White House where the real, structural risks lie.
Fox Business reported that Trump's nominee to be commissioner of the Bureau of Labor Statistics, EJ Antoni, had recently said that they could suspend the monthly jobs report.
He said that "until it is corrected, the BLS should suspend issuing the monthly job reports but keep publishing the more accurate, though less timely, quarterly data."
Antoni looks set to take over the BLS after Trump fired Erika McEntarfer, commissioner of the BLS, over what he said were "RIGGED" jobs figures "to make the Republicans, and ME, look bad".
"Increasingly this carries echoes of autocratic countries, where the heads of statistics agencies or central banks are being replaced. In these countries, critical data series are often discontinued and then reinstated a few months later after the 'problems' have supposedly been corrected, with (of course unexpectedly) significantly better values," says Michael Pfister, FX Analyst at Commerzbank.
"I'm not saying that this will necessarily happen here. But the developments of the last few days and weeks do not exactly fill me with optimism about the future – or the U.S. dollar," he adds.
Above: GBP/USD is trending higher again.
U.S. labour market figures have of late shown a discernible slowdown in hiring, which speaks of a cooling economy. Typically, the Fed might respond by cutting interest rates. However, Chair Jerome Powell and his colleagues have resisted cutting rates on account of still-high inflation.
Trump has made his feelings on the matter clear and has sought to influence the Fed into cutting interest rates, with Powell bearing the brunt of his ire.
Trump on Tuesday criticised Powell over the Fed's recent decisions to hold interest rates steady, saying "the damage he has done by always being Too Late is incalculable".
He also reopened attacks on Powell over the cost of the ongoing refurbishment to the Fed's headquarters in Washington, something we thought had been put to bed after his recent tour of the works.
"I am, though, considering allowing a major lawsuit against Powell to proceed because of the horrible, and grossly incompetent, job he has done in managing the construction of the Fed Buildings," said Trump.
President Donald Trump tours the Federal Reserve alongside Fed Chair Jerome Powell. Thursday, July 24, 2025. (Official White House Photo by Daniel Torok).
The renovation work is being leveraged by Trump to add pressure against Powell and his colleagues for not lowering interest rates. The consistent pressure bearing down on the Fed could influence decision making in the future, which puts the U.S. economy and financial system at risk of policy mistakes.
"All this reinforces my long-running bearish USD view," says Michael Brown, Senior Research Strategist at Pepperstone. "Structural headwinds from the erosion of economic precedent, and the independence of key agencies, will be incredibly tough to overcome."
Institutional integrity is a key tenet of the U.S. investment case in the eyes of international investors. Predictability, professionalism and independence from politics underpin that integrity.
Yet, in 2025 we have seen an unprecedented assault on institutional integrity, which will inevitably compromise the attractiveness of U.S. assets, including the Dollar.