US Dollar Index tumbles to near 97.50 as Trump considers candidates to replace Powell

• The US Dollar Index slumps to multi-year lows around 97.60 in Thursday’s Asian session.

• Trump renews attack on Powell, considering naming the next Fed Chair. 

• Traders brace for the final US Q1 GDP Growth Rate report, which is due later on Thursday. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, tumbles to a fresh three-and-a-half-year low near 97.60 during the early European session on Thursday. The concerns of Federal Reserve (Fed) independence and credibility weigh on the Greenback. 

According to a Wall Street Journal report, US President Donald Trump is considering selecting and announcing a successor for Federal Reserve (Fed) Chair Jerome Powell by September or October. The sources said Trump might consider former Fed Governor Kevin Warsh and National Economic Council Director Kevin Hassett as well as Treasury Secretary Scott Bessent.

"The move would raise questions about the potential erosion of Fed independence and potentially weaken credibility," said Kieran Williams, head of Asia FX at InTouch Capital Markets. "If this was the case it could recalibrate rate expectations, trigger reassessment of dollar positioning,” he added.

Fed Chair Jerome Powell said on Wednesday that Trump's tariff policies may well just cause a one-time jump in prices, but the risk that they could cause more persistent inflation is large enough for the Fed to be careful in considering further rate cuts. Financial markets have priced in nearly a 25% odds that the Fed will deliver a rate cut in the July meeting, up from 12% a week ago, according to the CME FedWatch tool.

Traders await the US economic data due later on Thursday for fresh impetus. The final US Q1 Gross Domestic Product (GDP) Growth Rate will be released, followed by Durable Goods Orders, the Chicago PMI, Pending Home Sales, and the weekly Initial Jobless Claims. If the reports show a stronger-than-expected outcome, this could help limit the USD’s losses in the near term.