Structural Challenges for the Dollar: Risks to Fed Independence and Increasing U.S. Debt

Written by Emily J. Thompson, Senior Investment Analyst

Source: WSJ

Updated: Aug 27 2025

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Source: WSJ

Threats to the Dollar: Concerns about the Federal Reserve's independence and a worsening U.S. budget deficit are putting structural stress on the dollar, according to Commerzbank's Antje Praefcke.
Impact of Fed Leadership Changes: President Trump's decision to fire Fed Governor Lisa Cook raises alarms about the central bank's ability to make necessary economic adjustments, which is crucial for maintaining currency value.
U.S. Debt Sustainability Issues: The potential high costs of Trump's tax and spending bill could exacerbate concerns regarding U.S. debt sustainability, especially with temporary tax breaks that may be hard to reverse.
Sterling's Positive Outlook: Analysts suggest a positive near-term outlook for sterling due to the Bank of England's cautious approach to interest rate cuts, while the euro may decline against the pound.

About the author

Emily J. Thompson

Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.