Global Dollar Slump Amid Iran-Israel Ceasefire and Trump’s Fed Comments; Euro Soars

PNN Business Desk: The value of the US dollar plunged globally on Thursday (June 26, 2025), hitting its lowest level in three and a half years against the euro. The drop comes in the wake of the fragile Iran-Israel ceasefire and controversial remarks made by US President Donald Trump regarding Federal Reserve Chairman Jerome Powell.

Concerns over the independence of the Federal Reserve have shaken investor confidence, prompting a broad-based sell-off of the dollar against all major currencies.

Dollar vs Major Currencies:

- Euro: Gained 0.2% to reach $1.1687, the highest since October 2021.

- Pound Sterling: Rose 0.2% to $1.3690, marking its strongest position since January 2022.

- Swiss Franc: Dollar fell to 0.833 CHF, its lowest since 2011. The franc also surged to a record high against the yen, with 1 CHF = 180.55 yen.

- Japanese Yen: The dollar slipped 0.2% to ¥144.89.

- Dollar Index: Dropped to 97.491, its lowest level since early 2022.

According to The Wall Street Journal, Trump is reportedly considering replacing Fed Chair Jerome Powell and may announce a successor by September or October. This speculation has intensified market uncertainty and weakened Powell’s position. Trump criticized Powell on Wednesday, calling him “pathetically bad” and “a man of average intelligence.” He accused the Fed of failing to reduce interest rates aggressively enough. Meanwhile, in testimony to the Senate, Powell warned that Trump’s aggressive tariff policies posed inflation risks, urging caution.

Market analysts say early nomination of a new Fed chair, especially if viewed as politically motivated, could damage the Fed’s credibility and independence, making investors question long-term interest rate policies. Kieran Williams, head of Asia FX at InTouch Capital Markets, noted: “If Trump pushes out Powell for political reasons, we’re likely to see more turbulence in the bond market and a further weakening of the dollar.”

Investor expectations for a July rate cut by the Federal Reserve have risen from 12% to 25% over the past week. Markets now anticipate a total rate reduction of 64 basis points by year-end, up from 46 basis points just days ago. US banking giant JP Morgan issued a stark warning on Wednesday, stating that Trump's renewed tariff agenda could slow US economic growth and fuel inflation.

The combination of geopolitical tension, central bank uncertainty, and trade policy fears has rocked global currency markets. With the euro and other currencies strengthening, the dollar’s dominance is facing its steepest challenge in years, shaking investor confidence worldwide.