Deutsche Bank analyst predicts dollar and US bonds to fall if Powell ousted

Last week, President Donald Trump reiterated his call for Federal Reserve Chairman Jerome Powell to resign.

According to Bloomberg, Trump continues to demand aggressive interest rate cuts from Powell. In turn, the Fed chairman said he would not resign at the president's request, emphasizing the regulator's independence. Analysts are warning of the possible consequences of Powell's ouster, predicting a decline in the dollar and Treasury bonds.

George Saravelos, head of currency strategy at Deutsche Bank, says the market estimates the probability of Powell's dismissal at only 20%. Currently, the dollar remains stable, Saravelos added.

However, if the Fed chairman is ousted, the analyst expects the trade-weighted exchange rate of the US dollar to plummet by at least 3–4% in the subsequent 24 hours. Risk premiums for the dollar and US bonds will rise. He added that the markets' further reaction will depend on the comments of other Fed members, the successor chosen for Powell, and the state of the country's economy.