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Introduction: Trump escalates attack on Federal Reserve in move to fire governorDonald Trump has moved to oust Lisa Cook, a governor at the Federal Reserve, in his latest attack on the American central bank.It is an unprecedented intervention by a US president, which threatens to undermine the independence of the central bank of the biggest economy in the world.Trump posted a letter on his social media platform Truth Social on Monday, claiming he had “sufficient cause” to fire Cook, based on allegations she made false statements on one or more mortgage loans.Cook, who is the first black woman to serve on the Fed Board in Washington, has sad that Trump has no authority to fire her and that she will not quit.She said:
I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.
The news has spooked markets, with the US dollar and long-dated Treasuries both falling on Tuesday. The US dollar index, which tracks the greenback against a basket of other major currencies, fell by 0.1%.Trump’s latest attack on the Fed follows “relentless pressure” on Fed Chair Jerome Powell, notes Tony Sycamore, of the broker IG. He says:
In the short term, the removal of Cook who has tended to vote with the FOMC majority, increases the likelihood of a Fed rate cut at the September FOMC meeting. A prospect expected to weigh on the US dollar and lend support to equities and other risk assets, including Bitcoin.
However, beyond the “sugar hit” of a rate cut in September, recent developments around key Fed personal, heighten concerns over rising political interference, raising the risk that traders view the Fed as politically compromised.
This could trigger a rerun of the “Sell US assets” theme seen earlier this year. In such a scenario, both the US dollar and US equities could experience sharp declines.
The agenda
1:30pm BST: US durable goods orders
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2:00pm BST: Case-Shiller US house prices
3:00pm BST: US CB consumer confidence report
ShareKey eventsShow key events onlyPlease turn on JavaScript to use this featureThe wobble in the UK bond market also follows a high reading for food inflation from the British Retail Consortium.It found that shop prices had risen at their fastest pace for 18 months, with food inflation hitting 4.2% in August. That was driven by a jump in the cost of grocery staples such as eggs and butter, the industry body said.Helen Dickinson, chief executive of the BRC, said the rapid rise added to the pressure on people already struggling with the cost of living.
Staples such as butter and eggs saw significant increases due to high demand, tightening supply, and increased labour costs.
Chocolate also got more expensive as global prices of cocoa remain high owing to poor harvests.
ShareUK gilts falling, pound slipsUK bonds are falling this morning: the yield on the two-year gilt rose by as much as 6 basis points to 4.008%, while the yield on the 30-year gilt also rose by 5.634%, its highest point since April. Bond yields rise when prices fall.It follows a rise in US Treasury yields after Donald Trump ordered the removal of Lisa Cook from the board of governors on the Federal Reserve, the US central bank.The sell-off in the bond market also follows reports over the weekend that the UK is facing an “IMF bailout”. Jagjit Chadha, a professor of economics at the University of Cambridge and former head of the National Institute for Economic and Social Research, claimed the economy was at risk of “collapse”.He said the financial situation was “as perilous the period leading up to the IMF loan of 1976”, when Britain had to be bailed out by the global banking body.He told the When the Facts Change Substack, written by Liam Halligan:
I’m in a world in which I could imagine it [an IMF bailout] happening, and we’ll be bereft in that case.
We will not be able to roll over debt, we will not be able to meet pensions payments, benefits will be hard to pay out.”
The pound is also a bit weaker this morning, down by 0.01% against the US dollar to $1.3456.ShareUpdated at 08.58 BSTEuropean stock markets open lowerEuropean shares are broadly down this morning, with the European Stoxx 600 index down by 0.7%.That was led by France’s Cac 40 index, which has dropped by 1.4%, mirroring a fall in its bond market.The UK’s blue chip FTSE 100 index is down by 0.6% this morning, with Associated British Foods, the owner of Primark, the biggest faller, down 3.9%.Meanwhile, the German Dax index has dropped 0.9%, while the Italian FTSE MIB has fallen by 1.2%.ShareFrench bonds fall on political uncertaintyPolitical uncertainty in France is shaking its bond market, with its 10-year bond yield rising by as much as 2 basis points this morning to trade around 3.51%, its highest level since March. Bond yields rise when prices fall.It comes after Prime minister François Bayrou called a confidence vote that could topple the French government next month, as he tries to find support for plans to shore up the government’s ailing public finances.Bayrou has said France is going through a “decisive moment”. If the government secures a majority in the confidence vote, it would be confirmed, he said, but “if it does not have a majority, the government will fall”.🇫🇷 🇮🇹 More French political turmoil may be enough to push yields on French bonds above those on Italian bonds – Bloomberg pic.twitter.com/oDWidwSD7C— Christophe Barraud🛢🐳 (@C_Barraud) August 26, 2025
Charlotte de Montpellier, senior economist at the broker ING, says the “obstacle is almost impossible to overcome”.
Bayrou’s centrist coalition holds just 210 of 577 seats in the Assembly. The far-right RN, far-left LFI, Greens, and Communists—together 264 MPs—have already declared they will vote against him. Only the Socialist Party could tip the balance, but early signals suggest they are unwilling to support the government without major revisions to the budget, which seems unlikely.
…If Bayrou loses the vote, President Macron will face a difficult choice: appoint a new prime minister capable of forming a government in a fragmented Assembly, or dissolve Parliament and call new elections—something he has previously ruled out. Either path would inject fresh uncertainty into an already fragile political landscape.
The likely fall of the government will weigh heavily on the French economy. With only 0.8% GDP growth expected this year, the economy was already weak, and the political crisis adds a new layer of uncertainty. Drafting and passing a 2026 budget will become even harder, delaying fiscal consolidation and potentially worsening France’s debt trajectory. The longer reforms are postponed, the greater the eventual adjustment will need to be.
In short, France’s political instability is becoming an economic liability. Investors and institutions will be watching closely—not just for what happens on 8 September, but for what comes next.
ShareCloser to home, there are a few corporate updates after the bank holiday. Soraya Benchikh, chief financial officer at British American Tobacco, is stepping down today, the company said in a statement. Javed Iqbal will act as the interim CFO until the company appoints a permanent successor.Meanwhile the FTSE 100 distribution group Bunzl has reported that its first-half sales rose by 0.8% to £5.76bn, in line with expectations. Pre-tax profit fell by 10.5% to £250.2m in the six months ended in June. However, the company said it would resume the remaining £86m of its previously announced £200m share buyback, after pausing it in April.ShareTrump’s attempt to intervene at the Federal Reserve has spooked investors, with gold, which is viewed as a safe haven asset, rising this morning. Economists at Deutsche Bank write:
Gold spiked by +1% and is holding on to most of this overnight gain, while futures on the S&P 500 (-0.14%) and the Nasdaq (-0.18%) are modestly lower.
Meanwhile, the Treasury curve has seen a sizeable steepening, with the 2yr yield trading -0.7bps lower but the 10yr up +2.9bps and the 30yr +4.5bps to 4.93%. This has brought the 2s30s slope to 122bps, its steepest since January 2022 when the Fed had not yet started its post-Covid hiking cycle.
ShareCook’s removal could help Trump’s push for lower interest ratesCook’s removal could push the Fed to a more dovish stance, say economists at Deutsche Bank. They write:
Were Cook’s dismissal to hold, it would open up another seat for Trump to fill on the seven-person Federal Reserve Board. With Stephen Miran nominated for the seat recently vacated by Governor Kugler and with Governors Waller and Bowman dissenting in favour of a rate cut at the July meeting, this would increase the prospects of a dovish majority on the Board.
Cook, who was appointed by President Joe Biden in 2022, was working a term that was not due to expire until 2038. If she were to be removed, it would give Trump the change to secure a four-person majority on the Fed’s board of governors.Market bets suggest there is an 82% chance that the Fed will vote to cut its key interest rate at its next meeting in mid-September. However, economic data coming out this week on inflation and the labour market could still sway the decision.Here is Justin Wolfers, an economics professor at the University of Michigan, drawing a parallel with Turkey’s president Recep Tayyip Erdoğan.ShareIntroduction: Trump escalates attack on Federal Reserve in move to fire governorDonald Trump has moved to oust Lisa Cook, a governor at the Federal Reserve, in his latest attack on the American central bank.It is an unprecedented intervention by a US president, which threatens to undermine the independence of the central bank of the biggest economy in the world.Trump posted a letter on his social media platform Truth Social on Monday, claiming he had “sufficient cause” to fire Cook, based on allegations she made false statements on one or more mortgage loans.Cook, who is the first black woman to serve on the Fed Board in Washington, has sad that Trump has no authority to fire her and that she will not quit.She said:
I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.
The news has spooked markets, with the US dollar and long-dated Treasuries both falling on Tuesday. The US dollar index, which tracks the greenback against a basket of other major currencies, fell by 0.1%.Trump’s latest attack on the Fed follows “relentless pressure” on Fed Chair Jerome Powell, notes Tony Sycamore, of the broker IG. He says:
In the short term, the removal of Cook who has tended to vote with the FOMC majority, increases the likelihood of a Fed rate cut at the September FOMC meeting. A prospect expected to weigh on the US dollar and lend support to equities and other risk assets, including Bitcoin.
However, beyond the “sugar hit” of a rate cut in September, recent developments around key Fed personal, heighten concerns over rising political interference, raising the risk that traders view the Fed as politically compromised.
This could trigger a rerun of the “Sell US assets” theme seen earlier this year. In such a scenario, both the US dollar and US equities could experience sharp declines.
The agenda
1:30pm BST: US durable goods orders
2:00pm BST: Case-Shiller US house prices
3:00pm BST: US CB consumer confidence report
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