Deutsche Bank Warns Trump Removal of Fed Chair Powell Risks Currency, Bond Market Collapse

Deutsche Bank has issued a stark warning about the potential financial turmoil if President Donald Trump replaces Federal Reserve Chair Jerome Powell with a candidate favoring lower interest rates. The bank's global head of FX research, George Saravelos, predicts a sharp decline in the U.S. dollar by 3% to 4% and a sell-off in U.S. Treasuries that could increase yields by 30 to 40 basis points within 24 hours of any announcement of Powell's removal. Such a move is expected to trigger a collapse in currency and bond markets due to rising inflation expectations, falling real yields, and increased risk premia stemming from institutional erosion and a loss of central bank independence. While many investors consider Powell's ouster unlikely, betting markets assign nearly a 19% probability to it. Trump has publicly criticized Powell for his handling of inflation and recently intensified pressure through a formal inquiry into the Federal Reserve's headquarters renovation, highlighting growing tensions. The situation poses risks not only to U.S. markets but also to global financial stability, as the Federal Reserve's credibility and its role in international monetary cooperation could be undermined.