Dollar Drops Most in Three Weeks as Fed Gets Subpoenas

Core Viewpoint - The dollar has experienced its largest decline in nearly three weeks due to concerns over political interference in monetary policy following grand jury subpoenas served to the Federal Reserve [1][2]. Group 1: Federal Reserve and Political Influence - Fed Chair Jerome Powell disclosed that the central bank received grand jury subpoenas, which could lead to criminal charges related to his testimony on headquarters renovations [1]. - The subpoenas are linked to the Fed's decision-making process on interest rates, which Powell stated was based on its own assessments rather than the preferences of President Donald Trump [2]. Group 2: Market Reactions and Sentiment - The Bloomberg Dollar Spot Index fell by 0.3%, marking its most significant drop since December 23, indicating a shift in market sentiment towards the dollar [1]. - Macro traders are expected to increase short positions on the US dollar due to the risk that Powell may be hindered in his role as Fed chair [3]. Group 3: Future Implications for the Dollar - Concerns over the Fed's autonomy could disrupt the previously bullish sentiment towards the dollar, particularly against the euro [4]. - Despite the current threats to the Fed's independence, analysts suggest that there are still positive factors supporting the dollar's strength in the long term [5].