Pound surges to seven-month high as dollar slides after Donald Trump 'triggers severe market backlash'

 The pound has surged to its highest level against the dollar since September after President Donald Trump reiterated his calls for the US Federal Reserve to cut interest rates.

This rise comes amid growing market concerns that the leader of the free world is seeking ways to fire the central bank's chairman Jerome Powell.

Financial markets have reacted strongly to the potential threat to the Fed's independence with sterling climbing 0.3 per cent to $1.342 amid a broader slump in the US currency.

European stock indexes were on track to open lower, mirroring similar movements that occurred on Wall Street on Monday.

Investors appear to be fleeing US assets in response to the uncertainty surrounding the central bank's leadership.

Gold rose to a new record high of $3,486 an ounce, following a 2.9 per cent jump on Monday. The precious metal's surge reflects growing concerns that President Trump could damage the independence of the Fed.

Furthermore, investors fear this interference might trigger a fresh inflation crisis in the US.

The flight from US assets has benefited traditional safe havens as market participants reassess risks associated with potential political interference in monetary policy.

Economists have issued stark warnings about the potential consequences of undermining the Federal Reserve's independence.

A JP Morgan economist cautioned: "Any reduction in the independence of the Fed would add upside risks to an inflation outlook that is already subject to upward pressures from tariffs and somewhat elevated inflation expectations."

Paul Ashworth at Capital Economics said: "Firing Powell would just be the first step in dismantling the Fed's independence. If Trump is set on lowering interest rates then he will have to fire the other six Fed board Members too, which would trigger a more severe market backlash."

Global markets were thrown into disarray after Trump announced sweeping tariffs earlier this month before introducing a 90-day pause on his more punitive levies for all countries but China.

The US President has sought to pressure nations, including the EU and UK, into restricting their trade with China in exchange for tariff exemptions.

Economists have warned the trade war will shave 0.8pc off the economy over the next two years, dashing the Chancellor's attempts to kickstart growth.