US President Donald Trump‘s fresh attack on Federal Reserve Chair Jerome Powell’s leadership triggered massive selloffs in equities, the US dollar, and Treasurys. Investors are concerned that Trump’s repeated hints of plans to oust Powell are undermining the Fed’s independence.

Trump has criticised Powell for not lowering interest rates despite declining oil prices and easing inflation concerns. In a recent Truth Social post, he said Powell is ‘always too late and wrong, and his termination cannot come fast enough.’

On Monday, the ICE US Dollar Index, which compares the dollar against six other currencies, dropped over 1% to a three-year low of 98.02. Elsewhere, the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite nosedived by over 2% each in a single trading session, reflecting a full-blown selloff in US assets.

Furthermore, the 30-year Treasury bond yield jumped to a three-month high of roughly 4.91% amid the selloff of long-dated US government debt. Market experts are now trying to determine the economic impact of Powell’s potential departure before his term ends in May 2026.

‘Were Powell to be fired, the initial reaction would be a huge injection of volatility into financial markets, and the most dramatic rush to the exit from US assets that it is possible to imagine,’ according to a note from Michael Brown of Pepperstone.

‘Lower, much lower, equities; Treasuries sold across the board; and, the dollar falling off a cliff,’ Brown said. He added that any threat to the Fed’s independence would lead to investors from around the world selling US-based assets they hold and increase the odds of ‘upending the entire way in which the global financial system operates.’

‘If this were to happen, then the reserve status of the dollar, and haven value of Treasuries, would be wiped out, probably forever in both cases,’ he cautioned investors.

Global Banks Downgrade Outlook on US Assets

Investment banks, including Goldman Sachs, are downgrading their outlook on US assets. Kamakshya Trivedi, head of global FX, rates, and EM strategy at Goldman Sachs, said the firm reversed its bullish dollar outlook several weeks ago due to heightened economic policy risks.

‘We flipped our Dollar view a few weeks ago, based in large part on tariffs and other US policy shifts raising uncertainty and impairing sentiment in the US,’ Trivedi said. ‘We expect that shift will lead to less exceptional outcomes for US assets.’

US Commodity Futures Trading Commission data from late last week revealed consistent outflows from dollar positions and rising bearish trades being placed by hedge funds.

BBVA strategist Alejandro Cuadrado said yesterday that global markets and the US dollar could be severely affected if Powell departs from the Fed. ‘Independence and credibility are key assets for the Fed and the US. If investors fear the US administration will control the central bank, the impact on confidence would be unprecedented,’ he said.

Meanwhile, Scotiabank’s strategist Shaun Osborne said inflation stability is historically linked to central bank independence. ‘Political interference in Fed policymaking would erode confidence in the USD and may bolster inflation in the longer run,’ Osborne said.

Originally published on IBTimes UK