Stocks wobble, dollar tips as Trump-Fed feud deepens

• The dollar fell below 158 yen and dropped to $1.1660 per euro as investors reacted to the Fed independence concerns, while S&P 500 futures declined 0.5%
• Fed fund futures priced in about three additional basis points of rate cuts this year, though analysts note the cash rate will ultimately remain what the FOMC majority decides
• Gold surged to a record high above $4,600 an ounce amid the Fed turmoil and escalating unrest in Iran, with Trump threatening intervention

Market Summary: Trump-Fed Conflict Rattles Markets

Key Developments:

Federal Reserve Chair Jerome Powell revealed that the Trump administration threatened him with criminal indictment over Congressional testimony regarding a Fed building renovation project. Powell characterized this as a "pretext" to pressure the central bank into cutting interest rates, marking a dramatic escalation in tensions dating back to 2018.

Market Reaction:

• S&P 500 futures fell 0.5%; European futures dropped 0.1%
• Dollar declined 0.2% against major currencies, falling below 158 yen and reaching $1.1660 per euro
• 10-year Treasury yields dropped approximately one basis point to 4.15%
• Fed fund futures priced in roughly three additional basis points of rate cuts for the year
• Gold surged to a record high above $4,600 per ounce
• Brent crude held gains at $62.90 per barrel
• MSCI Asia-Pacific index rose 0.5%

Market Implications:

Analysts view the conflict as an assault on central bank independence, though immediate rate policy impacts remain unclear. Strategists note Trump's actions demonstrate limited leverage over the Federal Open Market Committee (FOMC), which will maintain policy independence. The dollar weakness reflects investor concerns about institutional stability, with even risk-sensitive currencies like the Australian and New Zealand dollars gaining ground.

Additional Factors:

Escalating unrest in Iran and Trump's intervention threats supported safe-haven assets including gold and sustained oil prices, adding to geopolitical uncertainty.

Upcoming Catalysts:

Investors await U.S. inflation data, Chinese trade figures, and earnings reports from JPMorgan Chase and BNY on Tuesday.