Dollar Slides as Powell Says Trump Threatened Indictment, Markets Jittery

BY COMFORT OGBONNA

The U.S. dollar weakened and equity futures eased on Monday after Federal Reserve Chair Jerome Powell revealed that the Trump administration had threatened him with a criminal indictment, sparking concerns about the independence of the central bank. The remarks intensified market uncertainty and fueled speculation about the potential impact on monetary policy.

S&P 500 futures fell 0.5% in early trading, while gold surged to a new record high as investors sought safe-haven assets amid the escalation in tensions between President Donald Trump and the Fed. The immediate market reaction reflected fears that political interference could influence central bank decisions, even as the longer-term implications for interest rates remained unclear.

The Swiss franc rose 0.4% to 0.7979 per dollar, and the euro strengthened 0.17% to $1.1656. Traders described the news as unsettling, highlighting the risk that the Fed could be pressured to adopt a more aggressive policy stance. Fed funds futures, for example, priced in about three additional basis points of rate cuts this year, signaling modest expectations for policy shifts but pointing to the potential for greater volatility.

Gold reached a record above $4,600 an ounce, supported not only by worries over U.S. monetary policy but also by rising geopolitical risks. Protests in Iran and heightened tensions in the Middle East lifted demand for precious metals while helping support oil prices.

European stock futures inched lower on Monday, while Asian equities advanced, led by technology stocks. Data released on Friday showed that the U.S. labor market was slowing but not rapidly deteriorating, which helped ease some concerns about economic weakness. Japanese markets were closed for a holiday, limiting regional trading activity.

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 regarding a Fed building renovation project. He described the move as a “pretext” intended to pressure the central bank into lowering interest rates, marking a sharp escalation in the long-standing tension between the Fed chair and the president that dates back to 2018.

Analysts warned that the developments could weigh on investor confidence. Andrew Lilley, chief rates strategist at Sydney-based investment bank Barrenjoey, said, “Trump is pulling at the loose threads of central bank independence. The only reason he is taking these steps is that he knows he cannot control the Fed, so he wants to exert as much undue pressure as possible. Investors may not like it, but ultimately the cash rate will remain aligned with the majority of the FOMC’s decision.”

The dollar experienced the sharpest reaction, falling even against traditionally risk-sensitive currencies such as the Australian and New Zealand dollars. The dollar index dropped 0.3%, on track for its largest one-day decline since mid-December. The greenback had already suffered in 2025, falling more than 9% against major peers amid narrowing interest rate differentials, Federal Reserve rate cuts, and lingering concerns over U.S. fiscal deficits and political uncertainty. Ray Attrill, head of currency strategy at National Australia Bank, noted that “this open confrontation between the Fed and the U.S. administration is clearly not a positive signal for the dollar.”

Meanwhile, geopolitical tensions continued to influence markets. Trump’s threats to intervene in Iran, where protests against the clerical establishment are intensifying, helped maintain oil’s recent gains and highlighted the risks facing energy markets in the year ahead. After strong advances in previous sessions, Brent crude futures fell slightly, down about 40 cents to $62.90 a barrel.

Investors are preparing for a busy week ahead, with U.S. inflation data, trade figures from China, and the start of the corporate earnings season, including reports from major banks such as JPMorgan Chase and BNY Mellon on Tuesday. Market watchers are closely monitoring these developments as the combination of political tension, currency volatility, and geopolitical uncertainty continues to shape the global financial landscape.