Dollar Slips, Markets Waver as Powell Says Trump Threatened Indictment

BY COMFORT OGBONNA

The U.S. dollar weakened and American equity futures edged lower on Monday after Federal Reserve Chair Jerome Powell said the Trump administration had threatened him with a criminal indictment, raising fresh concerns about the independence of the central bank and unsettling global financial markets.

S&P 500 futures fell about 0.5% in early trading, while investors rushed toward safe-haven assets, pushing gold to another record high. The escalation in tensions between U.S. President Donald Trump and the Federal Reserve immediately rattled markets, with traders questioning whether political pressure could begin to influence monetary policy decisions.

In currency markets, the Swiss franc strengthened 0.4% to 0.7979 per dollar, while the euro rose 0.17% to $1.1656. Market participants described the developments as deeply unsettling, even though the near-term implications for interest rates remained uncertain. Fed funds futures reflected a modest shift, pricing in roughly three additional basis points of rate cuts this year, a small move but one that signaled growing concern the central bank could be pushed toward more aggressive easing.

Gold surged to a record above $4,600 an ounce, supported not only by worries over the Fed’s independence but also by rising geopolitical tensions. Unrest in Iran boosted demand for safe-haven assets and helped underpin oil prices, reinforcing a broader sense of global uncertainty.

European stock futures edged lower, while Asian equities rose, led by gains in the technology sector. The advance in Asia followed data released on Friday showing the U.S. labor market was slowing but not deteriorating sharply, easing fears of an abrupt economic downturn. Japanese markets were closed for a public holiday, limiting regional trading volumes.

On Sunday, Powell said the Trump administration had threatened him with a criminal indictment and issued grand jury subpoenas related to congressional testimony he gave last summer about a Federal Reserve building renovation project. Powell described the move as a “pretext” designed to pressure the central bank into cutting interest rates, marking what many observers see as a dramatic escalation in a long-running conflict between the Fed chair and the president that dates back to 2018.

Analysts warned that the episode could have lasting consequences for investor confidence. Andrew Lilley, chief rates strategist at Sydney-based investment bank Barrenjoey, said the actions amounted to an attempt to undermine the Fed’s autonomy. He added that while markets may react negatively, monetary policy would ultimately remain in the hands of the Federal Open Market Committee rather than the White House.

The dollar showed the sharpest reaction to the news, falling even against typically risk-sensitive currencies such as the Australian and New Zealand dollars. The dollar index slipped 0.3% and was on track for its largest one-day decline since mid-December. The greenback has already endured a difficult period, having fallen more than 9% against major peers in 2025 amid narrowing interest rate differentials, Federal Reserve rate cuts, and persistent concerns over U.S. fiscal deficits and political instability.

Currency strategists said the public clash between the administration and the Fed was damaging to the dollar’s global standing. The perception of political interference, they noted, could erode confidence in U.S. institutions and weigh further on the currency in the months ahead.

Beyond monetary policy, geopolitical risks continued to shape market sentiment. Trump’s threats to intervene in Iran, where protests against the clerical leadership appear to be intensifying, helped oil prices hold on to recent gains despite some pullback. After strong advances in recent sessions, Brent crude futures dipped about 40 cents to $62.90 a barrel, reflecting both profit-taking and ongoing uncertainty in the Middle East.

Looking ahead, investors are bracing for a busy week that could set the tone for markets in the early part of the year. The calendar includes key U.S. inflation data, trade figures from China, and the start of the U.S. corporate earnings season, with major banks such as JPMorgan Chase and Bank of New York Mellon set to report results on Tuesday. Together, these events are likely to test market resilience already strained by political confrontation, currency volatility, and rising global tensions.