Wall Street is hotly discussing "Trump firing Cook": The independence of the Federal Reserve is in danger! Bearish for the dollar, bullish for gold and Bitcoin

According to CCTV News, on August 25 local time, U.S. President Trump publicly announced in a letter to Federal Reserve Governor Lisa Cook on his social media platform "Truth Social" that he immediately dismissed her.

Wall Street Insight previously analyzed that if Cook leaves, Trump could gain four seats, bringing him closer to "controlling the Federal Reserve."

As the market generally expects Trump to appoint a more dovish candidate to replace Cook, the news led to a broad weakening of the dollar, a decline in short-term U.S. Treasury yields, and a surge in safe-haven assets like gold and Bitcoin.

Analysts generally believe that this move undermines market trust in America's core financial institutions and could pose a long-term challenge to the dollar's status as a global reserve currency. Investors are reassessing the risks in the U.S. market and shifting their focus to traditional safe-haven assets like gold and yen, as well as cryptocurrencies.

Alarm Raised on Federal Reserve Independence

Trump's actions have reignited doubts about the independence of the Federal Reserve.

IG market analyst Tony Sycamore pointed out:

“Following last week's pressure from Trump on Federal Reserve Chairman Powell, which led to Powell's capitulation, Trump's dismissal of Cook has again raised questions about the independence of the Federal Reserve and further weakened its ability to maintain an unbiased monetary policy free from political influence.”

Kyle Rodda, senior financial market analyst at CAPITAL.COM, bluntly stated:

“What is concerning is the intention of the Trump administration: it is not to uphold the integrity of the Federal Reserve, but to install Trump’s own people within it.”

“This brings us back to the issue of trust in institutions... This is yet another crack in the edifice of the U.S. and its investability.”

Shoki Omori, chief strategist at Mizuho Securities, expressed a similar view:

“This looks very bad. The Federal Reserve no longer appears to be an independent institution. The loss of confidence in the Federal Reserve may also lead to a loss of confidence in the dollar.”

Bart Wakabayashi, manager of State Street Bank's Tokyo branch, was even more outspoken:

“ All of this, including tariff policies, is yet another reason why the U.S. is untrustworthy.”

“There is no stability, no credibility. And that is what makes the U.S. the safest investment base globally. If you are a responsible investor, this will make you stop and think.”

Dollar Under Pressure, Safe-Haven Assets in Demand

In terms of asset impact, in addition to concerns over the loss of Federal Reserve independence, the market also generally expects the White House to nominate a more dovish candidate to fill the vacancy, which directly weighs on the dollar.

Christopher Wong, foreign exchange strategist at OCBC Bank, stated that Trump's actions are “another example of how concerns over Federal Reserve independence are pressuring the dollar,” and may lead to more dovish members on the Federal Open Market Committee (FOMC), thus “increasing expectations for interest rate cuts and a weaker dollar.” Australian Federal Bank foreign exchange strategist Carol Kong believes that firing Cook is just another attempt by Trump to influence FOMC decisions. She stated:

"The decline of the dollar against other major currencies clearly indicates that this development is unfavorable for the dollar, as it creates new opportunities for Trump to install another dovish governor on the FOMC committee."

Thomas Mathews, Head of Asia-Pacific Markets at Capital Economics, stated that the market reaction has been relatively mild, but it provides important clues for possible future scenarios:

"A steeper yield curve, rising long-end yields, and a weaker dollar."

Against this backdrop, the demand for assets such as gold, yen, and even Bitcoin is rising. Charu Chanana, Chief Investment Strategist at Saxo, stated:

"Gold and yen are rising, as investors are not hedging against a single firing, but rather the long-lasting shadow it casts on the independence of the Federal Reserve."

Kyle Rodda also pointed out:

"This is favorable for gold and will ultimately benefit Bitcoin as well."

The market has not fully priced in

Despite the swift market reaction, most analysts believe that the market has not fully digested all potential risks, and uncertainty remains high for the future.

Thomas Mathews, Head of Asia-Pacific Markets at Capital Economics, observed that the market's initial reaction was "quite mild," partly due to the timing of the news and uncertainty over whether Trump can successfully replace Cook. He believes:

"The real dramatic scenes may emerge when he continues to exert pressure after clearly ending the easing cycle."

The market has currently raised expectations for further rate cuts in September and later this year. However, Shoki Omori from Mizuho Securities warned that the market has not accounted for the possibility that Trump may target other Federal Reserve officials.