Dollar Hits 3-Year Lows, US Stocks Tumble As Trump Threatens To Fire Powell: 'Contrarians Of The World, Unite!'

Wall Street was gripped by a rare double sell-off Monday morning as U.S. stock futures and the dollar sank in tandem amid mounting fears that President Donald Trump could move to oust Federal Reserve Chair Jerome Powell well before his term expires in May 2026.

The U.S. dollar index, tracked by the Invesco DB USD Index Bullish Fund ETF UUP, fell 1.3% to 98.2, its lowest level since April 2022.

Meanwhile, futures tied to the S&P 500 index dropped 1.1% by 8:15 a.m. ET, with contracts on the Nasdaq 100 down 1.6%, reflecting the broad-based sell-off in U.S. assets.

Markets Fear Fed Interference

Trump had already laid the groundwork for market anxiety last week with a Truth Social post attacking Powell's leadership. "Jerome Powell is always too late and wrong. His termination cannot come fast enough."

Trump criticized Powell for not cutting interest rates despite falling oil prices and easing inflation concerns.

He then escalated the rhetoric during a public appearance with Italian Prime Minister Giorgia Meloni on Thursday. "If I want him out, he’ll be out of there real fast. Believe me."

National Economic Council director Kevin Hassett added fuel to the fire on Good Friday, when markets were closed for the Easter holiday, by confirming that the Trump administration is "considering" firing Powell.

"If Powell is removed from his position at the Fed, the impact on global markets and the USD could be severe," said Alejandro Cuadrado, strategist at BBVA, in a note Monday.

"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."

The market response is already visible in futures and foreign exchange flows. The synchronized sell-off in both U.S. equities and the dollar is particularly alarming for global investors, who often rely on the dollar as a safe-haven hedge during periods of equity market stress.

According to CFTC-regulated Kalshi, there is a 23% chance Powell could be ousted before the end of his mandate.

Goldman Sachs Flips On The Dollar

Major investment banks have already begun downgrading their stance on U.S. assets. Goldman Sachs's Kamakshya Trivedi said the firm reversed its bullish dollar outlook weeks ago, citing rising 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."

CFTC data released Friday backs that sentiment, showing continued outflows from dollar positions and growing bearish bets by hedge funds and institutional investors.

Long-Term Consequences Could Be Inflationary

Intervention in Fed policymaking doesn't just shake short-term confidence, it could have lasting inflationary effects.

Shaun Osborne, chief foreign exchange strategist at Scotiabank, said historical data shows a strong link between central bank independence and inflation stability.

"Political interference in Fed policy making would erode confidence in the USD and may bolster inflation in the longer run," Osborne said.

"There is ample literature showing a high correlation between central bank independence and low and stable inflation."

Even if Trump does not formally fire Powell, one potential workaround could involve nominating a "chairman in waiting" who actively comments on monetary policy before taking office, undermining Powell's authority and market credibility.

Contrarians Smell Opportunity Amid Panic

But not everyone is convinced that the panic will last. Veteran investor Ed Yardeni, president of Yardeni Research, sees signs that the bearishness could be peaking—possibly setting the stage for a countertrend rally.

"We don't recall this ever happening before," Yardeni said, referring to a recent trio of The Economist covers predicting a collapse in the dollar, U.S. markets and the global economy.

"Contrarians of the world, unite! Markets are always at peak bearishness before the bull," he said.

Yardeni acknowledges the wave of concerns—from Trump's chaotic trade war and foreign policy risks to Chinese deflation and the soaring price of gold—but indicates that the sheer saturation of negativity could signal an oversold environment.

One reason for hope: Beijing's recent signals that it is open to renegotiating trade with the Trump administration. Any progress on that front could ease global trade tensions and help stabilize investor sentiment.

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