Federal Reserve Chair Jerome Powell may be nearing the end of his tenure—months before his term officially expires in May 2026. In a move that could shake financial markets, Treasury Secretary Scott Bessent disclosed that the Trump administration is eyeing a 14-year Fed Board seat opening in January as a springboard for the next Fed Chair. This opens the door for a “shadow Chair” scenario, where a successor is groomed early and markets adjust policy expectations ahead of schedule.
Such moves align with recent dovish signals from Fed governors Michelle Bowman and Chris Waller both Trump appointees who have expressed openness to rate cuts as early as July. Their public stances, in combination with Powell’s increasing marginalization, suggest a strategic realignment at the central bank that could shape the trajectory of U.S. monetary policy through the 2030s.
The implications for the U.S. dollar are already apparent. The USD slid 2.6% in June, as markets now assign a 74% probability to a Fed rate cut by September. The dollar’s weakness has been exacerbated by concerns over Trump’s proposed “One Big Beautiful Bill,” which, despite advancing in the Senate, would inject $3.3 trillion into the federal deficit over the next decade fueling inflation risks and rattling bond markets.
Meanwhile, global economic dynamics are in flux. Japan’s Q2 Tankan Survey showed stronger-than-expected manufacturing sentiment and rising inflation expectations, suggesting the Bank of Japan may be forced to consider further rate hikes. But trade friction is complicating Tokyo’s economic outlook. President Trump has threatened 25% tariffs on Japanese autos and accused Japan of resisting U.S. rice imports. With the July 9 deadline looming, the fate of U.S.-Japan trade negotiations remains uncertain.
Oil markets also remain volatile. Prices tumbled to a three-week low amid easing fears over the Israel-Iran conflict and expectations of an OPEC+ production hike. The cartel plans to raise output by 411,000 barrels per day in August its fifth straight monthly increase bringing the annual total to 1.78 million barrels per day. However, concerns persist over global demand, especially from China, where factory activity continues to contract. Unlock your financial potential with expert-led trading courses from MJFXM – your trusted path to mastering the markets.
With the ISM Manufacturing PMI and Nonfarm Payrolls report on deck, traders will be watching closely. As geopolitical risks, central bank transitions, and fiscal policy all collide, markets face a storm of uncertainty.