In a surprising turn, President Donald Trump has backed away from his previous threats to fire Federal Reserve Chair Jerome Powell, a statement that seems to have calmed the markets after recent turbulence.

Speaking from the White House, Trump eased fears about Powell's job security, saying, "I have no intention of firing him," despite his earlier harsh criticism of the Fed for not cutting interest rates quickly enough.

Following Trump's remarks, U.S. stock futures shot up impressively, with the S&P 500 and Nasdaq-100 climbing over 1.7% and 1.9%, respectively. The U.S. dollar also strengthened, gaining more than 1% against major currencies.

Earlier in the day, Wall Street experienced a rally spurred by Treasury Secretary Scott Bessent's comments about easing trade tensions with China, labeling the ongoing trade war as "unsustainable." White House Press Secretary Karoline Leavitt echoed this sentiment, stating that the administration is preparing to reach an agreement with China.

The S&P 500 closed up more than 2.5%, while the Nasdaq soared over 2.7%. Asian markets followed suit with Japan's Nikkei 225 rising approximately 2% and Korea's KOSPI jumping around 1%.

Trump acknowledged the pain inflicted by tariffs on Chinese goods, indicating that the current 145% rate would soon be "substantially" lowered. His fluctuating stance on Powell has sparked considerable anxiety in the financial sector, given the prevailing belief that the Fed must operate independently for the sake of the nation’s economic health.

Markets experienced some of their most significant losses last Monday after Trump labeled Powell a "major loser" for not supporting quicker interest rate cuts. Just last week, Trump suggested that Powell's dismissal "cannot come fast enough," igniting fears among investors.

Despite Trump's call for action, the Fed remains cautious about adjusting borrowing costs, citing potential inflation risks from his tariffs. Powell, appointed by Trump in 2017, has firmly stated that he will not resign if pressured, emphasizing that he can only be removed for serious misconduct.

Under existing legal frameworks, independent federal agency heads, including the Fed Chair, can only be dismissed for specific, verified reasons. Any attempt to remove Powell might send shockwaves through the financial world, prompting a sell-off reminiscent of 2008 and triggering fears of a recession.

Economist Erasmus Kersting warned that such a move could lead to dramatic declines in stock and bond markets, significantly damaging the real economy.