Powell Vows to Resist Trump Pressure as Criminal Probe LaunchedPowell said on Sunday that federal prosecutors have opened a criminal investigation related to his Senate Banking Committee testimony on the renovation of Fed office buildings. Powell added that the investigation was another attempt by Trump to influence the central bank’s monetary policy and he would not bow to the pressure. His term as chair is up in May.Former Fed Officials Rally Behind Powell, Condemn ‘Unprecedented’ AttackMeanwhile, former ...

Core Viewpoint - The dollar index is experiencing a decline due to threats to the Federal Reserve's independence, particularly following comments from Fed Chair Powell regarding potential criminal charges from the Justice Department related to his testimony on Fed renovations [1][2]. Group 1: Federal Reserve Actions - Fed Chair Powell indicated that the Justice Department has issued grand jury subpoenas threatening criminal charges related to his June testimony on Fed headquarters renovations [2]. - Powell emphasized that the threat of criminal charges stems from the Fed's commitment to setting interest rates based on public interest rather than presidential preferences [2]. - The Federal Reserve is expected to cut interest rates by approximately 50 basis points in 2026, contributing to the dollar's underlying weakness [3]. Group 2: Market Reactions - The dollar index (DXY00) is down by 0.32%, reflecting market concerns over the Fed's independence and potential changes in leadership [1]. - The euro (EUR/USD) has risen by 0.35%, supported by the Fed's situation and an increase in the Eurozone's investor confidence index to a six-month high [5]. - Markets are currently pricing in a 5% probability of a 25 basis point rate cut at the upcoming FOMC meeting scheduled for January 27-28 [2]. Group 3: Future Expectations - The Federal Reserve has begun purchasing $40 billion a month in T-bills to boost liquidity in the financial system, which is also putting pressure on the dollar [4]. - Concerns are growing that President Trump may appoint a dovish Fed Chair, which could further negatively impact the dollar [4]. - National Economic Council Director Kevin Hassett is viewed as the most likely candidate for the next Fed Chair, perceived as the most dovish option by the markets [4].

Core Viewpoint - The U.S. dollar and stock futures declined while gold prices surged, indicating a return to the "Sell America" trade following the Department of Justice's criminal investigation into Federal Reserve Chair Jerome Powell [1][2]. Market Reactions - S&P 500 futures fell by 0.6% and the dollar decreased nearly 0.5% against the euro, while gold reached a record high, surpassing $4,600 per ounce for the first time [2]. - Economists expressed concerns that the DOJ's investigation could undermine the independence of the Federal Reserve [2][3]. Federal Reserve Independence Concerns - Goldman Sachs' chief economist highlighted that the investigation has intensified worries regarding the Fed's independence [3]. - Powell asserted that his decisions will be based on economic data, unaffected by external pressures [4]. Investigation Details - The DOJ issued grand jury subpoenas to the Fed related to Powell's testimony about renovations at the Fed's headquarters [5]. - This investigation is seen as a significant escalation in President Trump's efforts to influence the central bank's interest rate decisions [5]. Political Implications - The return of the "sell-America trade" is reminiscent of previous market reactions during heightened tensions between Trump and the Fed [6]. - Senator Thom Tillis opposed the investigation, which could complicate Trump's plans to nominate a successor for Powell [6]. - Tillis emphasized that the independence of both the Federal Reserve and the Department of Justice is now in question [7].

Whoever replaces Jerome Powell as chairman of the U.S. Federal Reserve in May knows one thing: If they don’t do what President Donald Trump wants, they risk being criminally prosecuted. That was the unambiguous message in Powell’s extraordinary statement yesterday, in which he vowed to continue to set monetary policy independently despite the federal grand jury subpoenas investigating his statements to Congress about alleged cost overruns in the renovation of the Fed’s headquarters. “This new threat is not ...

Core Viewpoint - The sentiment of "Sell America" has emerged in the markets following increased attacks by the Trump administration on the Federal Reserve, raising concerns about the central bank's independence in setting interest rates [1]. Market Reactions - The dollar, Treasuries, and US equities futures experienced declines after Fed Chair Jerome Powell indicated that a potential US criminal indictment was a result of disagreements over monetary policy [2]. - Bloomberg's dollar gauge fell by 0.3%, marking the largest drop since December 23, while S&P 500 futures decreased by 0.7% [4]. Investor Sentiment - Concerns regarding the Fed's independence are likely to create uncertainty around US monetary policy, prompting investors to diversify away from the dollar and consider traditional hedges like gold [3]. - Some strategists, including those from JPMorgan Asset Management, warned that the selloff could worsen if tensions escalate, predicting a steeper Treasury yield curve with long-term rates rising more than short-term rates [5]. Political Influence on Monetary Policy - The ongoing debate centers on the extent to which the US president can influence the nation's monetary policy, which has traditionally been insulated from political interference [6]. - Investors are reconsidering their exposure to US assets and the dollar, a trend reminiscent of market reactions following President Trump's announcement of universal tariffs last April [6].

Core Viewpoint - Gold and silver prices have reached record highs due to concerns regarding the independence of the Federal Reserve and ongoing geopolitical tensions [1] Group 1: Price Movements - Gold prices have surged to unprecedented levels, reflecting heightened investor anxiety [1] - Silver prices have also climbed significantly, indicating a broader trend in precious metals [1] Group 2: Economic Context - The rise in precious metal prices is attributed to fears surrounding the Federal Reserve's independence, which may impact monetary policy [1] - Geopolitical tensions are contributing to market volatility, further driving investors towards safe-haven assets like gold and silver [1]

The dollar fell against a basket of currencies after Federal Reserve Chair Jerome Powell said the Department of Justice had subpoenaed the central bank on Friday and threatened a criminal indictment against him over cost overruns at the agency's headquarters.The news is a stern reminder of the risks to Fed independence, especially as Powell "made it unusually clear" that the purpose of this was to influence monetary policy, Commerzbank's Thu Lan Nguyen said in a note.The U.S. government's move might not sig ...

Core Viewpoint - The future of Federal Reserve Chair Jerome Powell after his term ends in May 2026 is uncertain, with speculation surrounding whether he will remain on the board as a governor or leave the Fed entirely [1][5][12]. Group 1: Powell's Decision and Its Implications - Powell's potential departure could shift the balance of power on the Fed's Board of Governors, currently with three Trump appointees out of seven, potentially allowing the president to exert more influence over monetary policy [6][10]. - The Federal Reserve Act may allow the board's majority to dismiss individual bank presidents opposing rate cuts, raising concerns about the independence of the Fed if Powell were to leave [7][10]. - Powell's decision is complicated by the ongoing legal case involving Fed Governor Lisa Cook, which could affect the board's composition and Trump's ability to appoint new members [8][9]. Group 2: Political Context and Speculation - The current political climate is unprecedented, with President Trump openly seeking control over Fed policy, contrasting with past chairs who transitioned quietly to other roles [3][5]. - Powell's reluctance to disclose his future plans may serve as a strategic move to maintain leverage over the administration, signaling his willingness to stay or leave based on the president's nominee choices [11][13]. - Observers believe that Powell is likely to leave when his chairmanship ends, as staying could invite greater political scrutiny and undermine the Fed's independence [12].

Core Viewpoint - Bank of America CEO Brian Moynihan emphasizes that the focus on Federal Reserve rate changes is overshadowing the strength of the private sector in driving the U.S. economy [2][3] Group 1: Federal Reserve's Role - Moynihan argues that the U.S. economy is "much bigger" than the Federal Reserve and cautions against viewing small rate changes as critical turning points [2] - He believes that the Fed's role should primarily be visible during crises, acting as a lender of last resort to stabilize markets and prices [2] - Outside of crises, Moynihan suggests that the Fed should not be a focal point of attention in economic discussions [3] Group 2: Political Pressure and Market Concerns - Concerns are rising regarding potential political interference with the Fed as President Trump prepares to nominate a successor to Jerome Powell [3] - Moynihan warns that a lack of independence for the Fed could damage investor confidence, stating that "the market will punish people" if the Fed is not independent [3] Group 3: Market Reactions and Economic Indicators - The interview took place shortly after the Fed cut rates by a quarter point for the third consecutive meeting, amidst Trump's calls for deeper cuts [4] - JP Morgan and Goldman Sachs have adjusted their expectations for rate cuts based on recent Fed remarks and employment data, indicating a shift in market sentiment [5] - Veteran bond manager Bill Gross anticipates another rate reduction due to rising inflation, tariffs, and slowing wage growth, which are increasing economic pressures [6]

Group 1 - The CEO of Bank of America, Brian Moynihan, emphasizes that the U.S. economy is significantly larger than the Federal Reserve, urging that small rate changes should not be viewed as critical turning points [2][3] - Moynihan criticizes the excessive focus on the Fed, stating that the central bank's role should primarily be visible during crises, acting as a lender of last resort [2][3] - Concerns are raised regarding potential political interference in the Fed's operations, particularly with President Trump preparing to nominate a successor to Jerome Powell, which could impact investor confidence [3] Group 2 - The Fed's recent actions included a quarter-point rate cut for the third consecutive meeting, amidst ongoing pressure from President Trump for deeper cuts [3] - Market expectations regarding rate cuts have shifted, with JP Morgan initially anticipating a pause until January, while Goldman Sachs pointed to employment data as a signal for a likely cut [4] - New York Fed President John Williams described the current policy as "modestly restrictive," indicating room for adjustment as inflation remains around 2.75% and the labor market cools to pre-pandemic levels [5]