Trump's firing of Fed Governor Lisa Cook sparks concerns over Fed independence

Firing of Fed Governor follows Powell's pivot

President Donald Trump announced on Truth Social this morning the unprecedented firing of Federal Reserve (Fed) Governor Lisa Cook, citing alleged mortgage fraud as justification.

This move follows Trump’s relentless pressure on Fed Chair Jerome Powell, who finally buckled and announced a dovish pivot last week at Jackson Hole due to labour market softness. The Fed Chair's pivot came just days after the release of hawkish July Federal Open Market Committee (FOMC) minutes, which had highlighted upside inflation risks.

Allegations against Lisa Cook

The allegations against Cook stem from two mortgage applications in 2021, before her Fed tenure. According to Federal Housing Finance Agency Director Bill Pulte, Cook designated a $203,000 loan for a property in Ann Arbor, Michigan, as her primary residence in June 2021. Just two weeks later, she allegedly made the same claim for a $540,000 mortgage on an Atlanta condominium.

Pulte’s claims, amplified by Trump, suggest Cook falsified documents to secure favourable loan terms, prompting a Justice Department referral. Cook, the first Black woman on the Fed’s Board, denied wrongdoing, stating she would not be 'bullied' into resigning and is gathering facts to address the allegations.

Meanwhile, Cook’s removal and Powell’s surprise pivot have reignited concerns from earlier this year about the Fed’s independence and its capacity to maintain impartial monetary policy free from political influence.

Implications for US markets

These developments have significant implications for United States (US) equity markets and the US dollar. In the short term, the removal of Cook, who has tended to vote with the FOMC majority, increases the likelihood of a Fed interest rate cut at the September FOMC meeting, a prospect expected to weigh on the US dollar and lend support to equities and other risk assets, including Bitcoin.

However, beyond the 'sugar hit' of a rate cut in September, recent developments around key Fed personnel heighten concerns over rising political interference, raising the risk that traders view the Fed as politically compromised.

This could trigger a rerun of the 'Sell US assets' theme seen earlier this year. In such a scenario, both the US dollar and US equities could experience sharp declines.

US Dollar Index technical analysis

During the first six months of 2025, the US Dollar Index (DXY) fell 10.78% before finding trendline support last month near 96.50, coming from the 72.83 low of May 2011.

If the DXY were to see a sustained break below the 96.50 - 96.30 support, it would warn that the index is set to fall another 6% back towards support at approximately 90.50.

Aware that if the DXY can hold above support at 96.50 and then rebound above resistance at 101.00, it would signal that the DXY’s correction from the 114.77 high of September 2022 is complete and the uptrend in the DXY is set to resume.

DXY index monthly chart

• _{Source: TradingView. The figures stated are as of 26 August 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}