The message of the Fed was clear: it would not respond exaggerated, instead waiting for the data to show whether rates were a passing headwind or a deeper resistance.
But in Jackson Hole the tone of Powell shifted. A delaying economy, the weakening of job creation and fragile consumer expenditures led him to make it strong that the cutbacks could arrive in September.
For the dollar – once disturbed by higher interest rates and trust – this shift can indicate the start of a longer period of weakness.
This is why the Greenback can quickly undergo serious pressure.
1. Powell’s pivot point: a cautious step in the direction of cuts
Powell acknowledged that GDP growth has been greatly delayed: the economy grew by only 1.2% in the first half of 2025, less than half the pace of 2.5% last year. Consumer spending – the motor of the US economy – are noticeably cooled.
Against this background, Powell said that the Fed no longer overslets the luxury of deliberate inflation. Instead, the strategy will return to a more flexible approach – a recognition that protecting the labor market is now of the utmost importance.
For investors this means that lower rates can be on the horizon. And historically, when the American yields fall, the demand for dollars also applies.
2. The labor market flashes red
For years, jobs were the backbone of the recovery of America, but that support is now quickly weakened. In 2024, employers added around 168,000 jobs per month. In the past three months, that pace has fallen to only 35,000, because companies withdraw from hiring in the midst of tariff uncertainty, higher costs and restructuring by AI.
The details are even more disturbing. Long-term unemployment that rose more than 27 weeks without work-is to 1.8 million people, an increase of 20% compared to last year. This is not only a statistics: the longer people stay unemployed, the harder it is to enter the staff again, so that both households and productivity brought resistance.
At the same time, young employees are confronted with a perfect storm. Rolls disappear at entry level, replaced by AI or consolidated in fewer positions, so that graduates compete against older employees who are also looking for jobs. Economists warn of a “lost generation” effect, where delayed careers and incomes in the housing demand, family formation and general consumption run.
For the FED this is the real red flag: a weakening labor market is feeding directly in lower consumer spending – the engine of the US growth – and indicates the need for simpler policy. For the dollar that means pressure ahead.
3. Politically, the Fed’s house arrives
If the economic weakness was not enough, politics has just added a new layer of uncertainty. President Donald Trump shocked markets this week by dismissing the Governor Lisa Cook of the Federal Reserve-first in the 111-year history of the Central Bank.
The move, generally as an attack on FED Independence, rattled investors. Cook himself has rejected the authority of the president to remove her and promises to remain in her position, while the Ministry of Justice is investigating individual allegations of mortgage fraud.
Regardless of the outcome, the damage may have already been caused. Central banks derive credibility from independence. If markets begin to see our monetary policy as politicized, trust in the dollar can quickly erode.
4. A debt spiral without end
In addition to jobs, the tax prospects of America in his own crisis will be. In just 48 days, $ 1 trillion was added to the national debt – an amazing $ 21 billion a day. The US is now only one step away from crossing $ 38 trillion, barely weeks after celebrating the $ 37 trillion.
Shortages explode at a pace that is recently seen in wartime. During the first ten months of Fiscale 2025, the US has already contracted $ 1.63 trillion in red ink, with only July a shortage of $ 291 billion in the second worst July ever recorded. Expenditure is the culprit: federal expenses rose almost 10% on an annual basis, while sales hardly grew by 2.5%.
Even with lower interest rates, the figures are incorrect. Lowering the loan costs can slightly lower the government’s interest payments, but it does not do much to solve the real problem – federal expenses rise much faster than income.
Investors are starting to reduce and demand higher yields at treasury auctions – an early warning that the creditworthiness of America is being investigated.
This is dangerous for the dollar. If confidence in the American debts weakens, the reserve currency in the world could quickly lose its safe port premium.
The Takeaway: a dollar on shaky ground
The story that once supported the dollar strength – resilient growth, high yields, fans credibility and tax stability – has been unraveled.
• Growth is delayed.
• jobs are weakened.
• The FED is confronted with political interference.
• Debt explodes in wartime.
For now, the dollar remains the reserve currency of the world. But if Powell’s hinge, the pressure of Trump and the spending of Washington, the dominance of the Greenback, can be the most vulnerable piece in decades. The breaking point may not come tomorrow – but the cracks are already visible.
From a technical point of view, the dollar is also at a delicate moment. The DXY test a crucial trendline support; A decisive break below can speed up the downward momentum. Direct goals are clustered near 97.10, while a deeper slide can open the road to the 96.50 zone.
In other words, both Fundamentals and Technicals begin to reconcile, point to a dollar on thinner ice than at any time in recent years.
as a reliable and trusted news source(The author is MD, CR Forex Advisors. The views are own)
((Indemnification: Recommendations, suggestions, views and opinions of the experts are their own. These do not represent the views of economic times)
#Shaken #dollars #jobs #politics #shortages #test #core