Markets Brace for Turmoil on Speculation of Powell’s Potential Exit

A sudden resignation or forced removal of Federal Reserve Chair Jerome Powell would trigger both political upheaval and financial volatility, raising questions over the central bank’s independence and future policy direction.

Although the Fed Chair enjoys legal protection from arbitrary dismissal, fresh scrutiny of the central bank’s $2.5 billion renovation project has reportedly given President Trump and his allies potential grounds for a “for cause” challenge. The prospect of Powell being pushed out underscores rising tensions between the White House and the Fed.

Dollar at Risk of Sharp Decline

If Powell were to step down or be removed unexpectedly, investor confidence in the Fed’s institutional autonomy would be seriously shaken. Analysts warn that the U.S. dollar could suffer an immediate selloff against major currencies.

USD/JPY, in particular, may slide toward ¥145, with safe-haven flows likely to benefit the yen. Should panic intensify, a deeper move toward the 142.20 support zone—an earlier consolidation base—cannot be ruled out. The Swiss franc, often viewed as a more reliable safe haven in times of political stress, could attract stronger inflows, amplifying downside pressure on the greenback.

Sterling Could Lead the Charge Higher

In contrast, the British pound could stage a sharp rally if markets anticipate a more dovish Fed emerging under new leadership aligned with Trump’s agenda. GBP/USD, already seen by some as oversold, may find fresh momentum, with a rebound toward 1.3700 likely if traders begin pricing in accelerated U.S. rate cuts.

Wider Market Implications

Beyond FX markets, a Powell departure could ripple into gold and Treasury yields. Gold prices may climb on heightened uncertainty, while U.S. bond yields could fall as expectations of policy accommodation strengthen. Equity markets, meanwhile, could face a volatile adjustment period as investors weigh the risks of political interference in monetary policy against the potential boost of looser financial conditions.