Financial markets plunged into chaos on Tuesday as President Donald Trump triggered a constitutional firestorm by abruptly firing Federal Reserve Governor Lisa Cook, sending the US dollar into freefall and sparking a global sell-off.
Unprecedented Move Rocks Washington
In a move that legal experts are calling constitutionally dubious, President Trump announced the immediate termination of Governor Cook via his Truth Social platform. The dismissal came just hours after Cook voted to maintain current interest rates, contradicting Trump's public demands for aggressive cuts.
The White House justification cited "poor performance" and alleged "failure to adhere to the administration's economic vision," though many observers see it as retaliation for her independent stance on monetary policy.
Market Carnage Erupts
The financial reaction was immediate and severe:
- The US dollar index plummeted to its lowest level since November, down 1.7% against major currencies
- Gold prices surged as panicked investors fled to safe-haven assets
- Wall Street opened sharply lower, with the Dow Jones dropping over 400 points
- Government bond yields fell sharply as traders anticipated emergency Fed action
"This is uncharted territory," said Marcus Bullus, trading director at MB Capital. "The independence of the Federal Reserve has been the bedrock of global financial stability for decades. Trump isn't just rocking the boat - he's trying to sink the whole vessel."
Legal and Constitutional Crisis Looms
Legal scholars are questioning whether Trump actually possesses the authority to remove a sitting Fed governor. The Federal Reserve Act provides governors with 14-year terms specifically to insulate them from political pressure.
Former Fed officials and constitutional experts have rushed to condemn the move, warning it threatens the very foundation of central bank independence and could have lasting consequences for US economic credibility.
Global Reaction and Fallout
The international response has been one of alarm, with European and Asian markets following Wall Street lower. The pound strengthened significantly against the wounded dollar, while oil prices dipped on concerns about economic instability.
Analysts warn the crisis could escalate further if other Fed officials resign in protest or if the courts become involved in what is rapidly developing into a constitutional showdown between the executive branch and an independent federal agency.
The situation remains fluid, with investors bracing for potential emergency statements from either the White House or Federal Reserve leadership as the trading day continues.
