Trump Intensifies Fed Pressure as Strong GDP Complicates Rate Cut Path

USD Analysis: The US Dollar Index (DXY) touched fresh lows near 97.74 as political pressure on the Federal Reserve mounts, creating a divergence between economic data and monetary policy expectations.

President Donald Trump recently reiterated his demand for a Federal Reserve Chair willing to cut interest rates even amidst strong economic performance, signaling a potential shift toward politicized monetary policy. “I want a Fed Chairman who will lower rates when the market is doing well,” Trump stated, directly challenging the central bank's traditional data-dependent mandate.

The “Good News is Bad News” Paradox

Despite the Bureau of Economic Analysis reporting a robust 4.3% annualized GDP growth for Q3 which beat expectations, the greenback has struggled to find support. The market is currently wrestling with two conflicting narratives:

1. Economic Resilience: Strong growth usually implies “higher for longer” rates to check inflation.
2. Political Intervention: Trump's rhetoric suggests a future Fed regime that prioritizes low borrowing costs over inflation control, effectively capping Treasury yields and weakening the dollar's appeal.

Analyst Caution

While headline GDP figures appear robust, skepticism remains regarding the quality of growth. Moodys analysts have warned that stripping away volatile components reveals a “real” growth rate closer to 2%, suggesting the labor market may be more fragile than headline figures indicate. This softness aligns with Trump's push for easier conditions but complicates the Fed's immediate inflation fight.

Market Impact: If political pressure erodes the Fed's credibility as an independent inflation fighter, the US Dollar risks a structural devaluation, regardless of short-term GDP beats.