Trump Chastises Fed Chair Powell, Dollar Hits 3yr Low

The US dollar fell further on Wednesday, hitting its lowest level against the euro since November 2021, after President Trump called Jerome Powell “terrible” and hinted he may name a successor as early as September. The dollar index is now down 10% year-to-date, while the euro and Swiss franc strengthened sharply. Wall Street ended basically flat, while Shell denied reports of takeover talks with BP after the Wall Street Journal suggested early-stage discussions.

Equities

The FTSE 100 fell 0.5% on Wednesday, as investors reacted to corporate earnings and shifting expectations for interest rates. The FTSE 250 slipped 0.1%. Defence engineering firm Babcock gained 10.7% after it raised its medium-term outlook, citing rising defence spending.

Rolls-Royce and BAE Systems each rose around 1%, supported by news that the UK plans to buy 12 F-35A fighter jets capable of carrying tactical nuclear weapons. Burberry shares rose 4.8% after HSBC raised its target price ahead of the company's first-quarter trading update due next month.

Liontrust Asset Management dropped 13% following a fall in annual profit, which the firm linked to weaker markets influenced by tariffs. After the close, news emerged via The Wall Street Journal that Shell is in early-stage talks to acquire BP. While no deal has been confirmed, US-listed BP shares jumped 7%, while Shell fell 3.8%.

In the US, the S&P 500 ended the day flat, holding near record highs. The Nasdaq rose 0.31% while the Dow Jones fell 0.25%. Nvidia hit a new record high, lifting its market capitalisation to $3.75 trillion, making it the most valuable listed company in the world.

Tesla fell 3.8% after reporting a fifth consecutive monthly decline in European sales. FedEx dropped 3.3% after issuing a profit forecast below expectations, pointing to weaker demand due to tariffs. UPS was down 1.2%. General Mills shares slipped 5.1% following disappointing profit guidance.

Micron Technology jumped over 5% in after-hours trading after issuing a stronger-than-expected revenue forecast for the fourth quarter. BlackBerry rose 12.5% after raising its revenue outlook, citing steady demand in its cybersecurity business.

Forex & Commodities

The US dollar fell to its weakest level against the euro since October 2021, with the single currency rising 0.43% to $1.1658. Sterling climbed 0.33% to $1.3659, marking its highest point since January 2022. The dollar continued to slide after sharp declines earlier in the week, triggered by a ceasefire agreement between Israel and Iran and renewed expectations of interest rate cuts by the Federal Reserve. Meanwhile, the dollar gained 0.18% to 145.17 yen, as the Bank of Japan signalled caution around adjusting its policy due to uncertainty over US tariffs.

In his testimony to Congress, Fed Chair Jerome Powell reiterated the potential inflationary effect of Trump-era tariffs and hinted that rates would likely remain on hold for now. Fed officials including Michelle Bowman and Christopher Waller have backed imminent rate cuts, pushing traders to fully price in a September cut and a total of 62 basis points of easing by year-end.

Gold prices were supported by the weaker dollar and fresh uncertainty after reports suggested President Trump may move to replace Powell as Fed chair by autumn. Spot gold edged up 0.2% to $3,339.20 an ounce, with US gold futures rising 0.3% to $3,353.10. Trump’s criticism of Powell and questions over central bank independence have added to the appeal of safe-haven assets.

Oil prices inched higher, with Brent crude up 0.2% at $67.83 a barrel and WTI gaining 0.3% to $65.12. A drawdown of 5.8 million barrels in US crude inventories and rising gasoline demand supported the move. Data showed US gasoline demand reached its highest level since December 2021, reinforcing signs of seasonal strength.