Markets expect Lisa Cook to hold seat at the Fed with support from her team

President Donald Trump said Monday from the White House that Lisa Cook was being removed from the Federal Reserve Board of Governors, effective immediately.

He claimed Lisa may have faked documents tied to a mortgage application. She hasn’t been charged. No court. No trial. No sentence. But Trump says the accusations are enough.

Lisa, through her lawyer, responded just hours later, saying she’s not stepping down, and the Fed team is standing by her. “No cause exists under the law,” she said in a statement shared by attorney Abbe David Lowell. “I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.”

According to information in the initial legal filing, Lisa was reappointed in 2023 to a full term that’s supposed to run through January 2038. Lowell warned they will take “whatever actions are needed” to stop Trump’s “attempted illegal action.”

Trump tries legal clause to kick Lisa out

Trump used a section from the Fed’s original charter that lets a president remove a governor “for cause.” He claims the mortgage fraud accusations meet that threshold.

Legal experts disagree, calling the move shaky. The clause hasn’t been tested like this before. If this works, it opens the door for Trump to remove more board members, and replace them with loyalists.

Trump’s been slamming the institution for years. His target now is Lisa, but his pressure already broke through last week when Chair Jerome Powell gave in and signaled a future rate cut. Now, with Lisa in his sights, investors expect another wave of Trump picks, likely more dovish voices.

Tony Sycamore, market analyst at IG in Sydney, called out the pressure. “Trump’s removal of Cook, following his relentless pressure on Fed Chair Jerome Powell that saw the Fed Chair buckle last week, reignites questions around the Fed’s independence and further undermines its ability to maintain impartial monetary policy free from political influence.”

The Fed is supposed to be independent. But Trump wants to make it political. Firing Lisa, even if blocked later in court, sends a message that he’s willing to fight his own central bank to get rates down. If the White House wins this round, the composition of the Federal Open Market Committee could tilt further toward rate cutters. And markets are watching.

Traders see dollar weakness as trust in Fed drops

Traders are betting on less Fed independence and more political interference, especially if Trump replaces Lisa with someone who shares his views.

Christopher Wong, currency strategist at OCBC in Singapore, laid it out clearly: “The move is another example of concerns over the Fed’s independence weighing on the dollar and has implications for the potential make-up of the FOMC going forward, which could see more dovish-leaning members. That adds to rate-cut prospects and a softer dollar outlook.”

At State Street’s Tokyo branch, Bart Wakabayashi said he believes: “All of this, tariffs included, is just another reason the U.S. can’t be trusted. That’s what’s impacting the dollar. It’s chaos. There’s no stability. There’s no credibility. That’s the basis of the U.S. being the safest investment in the world. If you’re a responsible investor, it gives you pause.”

Carol Kong, a currency strategist at Commonwealth Bank of Australia in Sydney, added: “His removal of Cook is just another attempt to influence FOMC policymaking … he has been doing so for the past couple of months. As evidenced by the dollar’s fall against other major currencies, this development is certainly dollar-negative because it would just create another opening for Trump to install another dovish governor within the FOMC.”

Thomas Mathews, head of markets for Asia Pacific at Capital Economics in Wellington, said the market hasn’t reacted strongly yet. “The bigger picture, though, is that right now Trump is pressuring the Fed to do something that it was probably going to do anyway, which is cut rates.”

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