Markets in the United States had a largely muted reaction on Tuesday after President Donald Trump announced he was firing Federal Reserve governor Lisa Cook the night before.

The move, which would mark the first time in Fed history that a president has fired a member of the Fed board, initially caused the dollar’s value to sink, but markets were largely in the green on Tuesday as Cook announced a legal challenge to the filing and an effort to stay at the central bank.

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The Dow Jones Industrial Average rose about 141 points on Tuesday, a small 0.3% uptick. The tech-heavy Nasdaq was up just over 0.4% and the benchmark S&P 500 increased by a similar amount.

After plunging right after the news on Monday night, the Bloomberg Dollar Spot Index showed that the dollar clawed back some of those losses and was down only about 0.23% as of Tuesday evening.

The controversy over Cook is just one aspect of the uncertainty related to the Fed. Trump said earlier this year that he might fire Fed Chairman Jerome Powell, which would likely cause a much greater market reaction. More recently, though, Trump has backed off that threat. Powell’s term is already coming to a close in May 2026, and the president will get to nominate someone new for the job.

Jamie Cox, managing partner for Harris Financial Group, told the Washington Examiner that he thinks the markets have been so muted after the news because Powell will likely remain at the Fed for the time being.

“My initial reaction was markets are calm because Powell’s job is completely safe,” Cox said.

Although the Supreme Court ruled this year that the president generally has the power to remove independent agency members, the conservative majority said that Federal Reserve board members can only be fired for cause.

Trump is arguing that the allegations of mortgage fraud leveled by Federal Housing Finance Agency Director Bill Pulte are the cause he needs to terminate Cook’s employment.

Cox said he thinks the administration probably worked hard to find a cause to fire Powell, but could not.

“He had to really go reaching for some pretty low-bar items to fire Cook,” Cox said.

Allegations against Cook became big news last week when Pulte sent a referral to Attorney General Pam Bondi over allegations that Cook had committed fraud. Trump called for her to resign soon after, although she has pushed back and argued that she hasn’t done anything wrong.

Mark Hamrick, senior economic analyst at Bankrate, thinks that market participants are taking a “wait-and-see” attitude toward the move.

“It’s not immediately clear that the president has the ability to follow through on his threat, meaning remove her from office,” Hamrick told the Washington Examiner. “And of course, a Federal Reserve board governor is not the same as the Federal Reserve chair.”

“Markets are waiting to see how this plays out,” he added.

Cook is challenging the matter. She released a statement late Monday night through her attorneys, saying she would not step aside and would continue in the role. Her attorney later said he would file a lawsuit challenging the dismissal.

WHO IS LISA COOK, THE FED GOVERNOR TRUMP IS TRYING TO FIRE?

In a statement, the Federal Reserve board said it would stand by Cook if a court rules in her favor, although the Fed didn’t directly address whether Cook is still at the Fed’s offices or working pending the court ruling.

“Lisa Cook has indicated through her personal attorney that she will promptly challenge this action in court and seek a judicial decision that would confirm her ability to continue to fulfill her responsibilities as a Senate-confirmed member of the Board of Governors of the Federal Reserve System,” the statement said. “As always, the Federal Reserve will abide by any court decision.”