Dollar Slumps to 3-Year Low as Trump Escalates on Fed: April 21, 2025

President Trump’s escalating demands for the Federal Reserve to lower rates are sparking market turbulence and sending stocks and the greenback into free fall. The Commander in Chief is looking to offset some of the economic risks from the trade war and immigration restriction with easier financial conditions. But international tensions heightened further over the Easter weekend with Beijing warning nations not to reach a deal with Washington at China’s expense. Meanwhile, White House pressure for Fed cuts is steepening the yield curve, as traders see short-term reductions propelling inflation down the line. Indeed, investors are scooping up the short end while dumping duration. Participants are also showing interest in forecast contracts, volatility protection and safe-haven commodities, namely gold and silver futures.

Conference Board LEI Warning

The Conference Board’s US Leading Economic Index pointed to trouble ahead as three major components declined sharply. Equity prices, ISM new orders and consumer expectations for business conditions drove a sizeable 0.7% month-over-month drop in March, missing estimates calling for a 0.5% fall and beneath February’s 0.2% growth rate.

Gold Hits All-Time High

Stocks, the greenback and Treasuries that mature in seven or more years are getting hammered as cloudiness regarding monetary policy stability weighs on the outlook for rates and inflation. An intensification in Chinese rhetoric on the trade front is also burdening investor sentiment. All major stock benchmarks are much lower with the Nasdaq 100, S&P 500, Dow Jones Industrial and Russell 2000 gauges losing 3.1%, 2.9%, 2.8% and 2.5%. Every sector is down by more than 1% and consumer discretionary, technology and energy are taking the most pain, plummetting 3.7%, 3.6% and 3.1%. Treasuries are shifting in bifurcated fashion across the curve with the 2- and 10-year maturities changing hands at 3.73% and 4.37%, 7 basis points (bps) lighter on the former but 4 bps heavier on the latter. The greenback is plunging with its index down 103 bps to a three-year low and the US currency is depreciating relative to all of its major counterparts, including the euro, pound sterling, franc, yen, yuan, loonie and Aussie tender. Cyclical commodities are mostly south but safe havens are doing better as crude oil and lumber shed 2.4% and 1% while gold and silver climb 2.8% and 0.5%. Gold reached a fresh all-time high this morning.

A Cloudy Outlook for the Fed

President Trump’s increasingly confrontational posture against Fed Chair Jerome Powell is making investors wonder if the central bank’s inflation mandate will go out of the window during his term. That’s why duration and the greenback are selling off while short maturities are getting scooped up. The committee’s focus on cost pressures and its avoidance of political developments over the years is a significant part of the reason that the US dollar and Treasury instruments are heavily sought throughout periods of economic and financial market turbulence. The perception of an incremental shift toward allowing elevated rates of price increases to occur is clouding the fundamentals of global safe-haven assets and contributing further to yet another record for gold.