Stocks wobble, dollar tips as Trump-Fed feud deepens
The dollar fell and U.S. stock futures rose after Federal Reserve chairman Jerome Powell said the Trump administration was threatening him with criminal charges, raising investors’ concerns about the central bank’s independence.
S&P 500 futures fell 0.5 percent, while European futures lost 0.1 percent in Asia on Monday morning and the dollar fell roughly 0.2 percent against most major currencies, falling below 158 yen and $1.1660 per euro.
Investors said the news was disturbing, but its direct impact on interest rates was unclear.
Benchmark 10-year Treasury futures rose three ticks for an implied yield of 4.15 percent; That’s about one basis point below Friday’s cash market close.
Fed funds futures have cut about three basis points more this year; This is a small number, but it points to the risk of the Fed being pushed to be more aggressive.
Gold hit a record high above $4,600 per ounce as unrest in Iran boosted precious metal prices and supported oil.
On Sunday, Powell said the Trump administration had threatened him with a criminal indictment and served grand jury subpoenas over his testimony to Congress about the Fed building renovation project; He described this action as an “excuse” aimed at pressuring the central bank to lower interest rates.
The developments mark a dramatic escalation in the feud between Powell and US President Donald Trump, which dates back to the banker’s early years as president in 2018.
“Trump is pulling the loose strings of central bank independence,” said Andrew Lilley, interest rate strategist at Barrenjoey, a Sydney-based investment bank.
“The only reason he’s taking these steps is because he knows the Fed won’t take control of it, so he wants to apply as much extreme pressure as possible.
“Investors will not be happy about this, but it actually shows that Trump has no other leverage to use. The cash rate will remain as the majority of the FOMC (Federal Open Market Committee) wants.”
The dollar reacted the harshest; It has even fallen against typically risk-sensitive currencies such as the Australian and New Zealand dollars, helping the yen escape the weak-side intervention risk zone of 158 per dollar.
“This open war between the Fed and the US administration is clearly not a good look for the US dollar,” said Ray Attrill, head of foreign exchange strategy at National Australia Bank.
On the other hand, Trump’s threats to intervene in Iran, where protests against the religious order have intensified, helped oil prices maintain recent gains and underlined geopolitical risks swirling for the year ahead.
Following sharp gains in recent sessions, benchmark Brent crude futures fell about 40 cents to $62.90 a barrel.
MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.5 percent, while Japanese markets were closed for a holiday.
The second full week of the New Year will include US inflation data, trade figures from China and US earnings starting with JPMorgan Chase and BNY on Tuesday.
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