AMERICAS Powell pulls no punches

• Powell stated the indictment threat is 'not about my testimony last June or about the renovation' but rather 'a consequence of the Federal Reserve setting interest rates based on our best assessment' rather than 'following the preferences of the President'
• Senator Tillis questioned the DOJ's 'independence and credibility' and vowed to oppose all Trump Fed nominees, including Powell's successor, until the legal matter is fully resolved
• Market impact was muted: rates markets priced slightly higher chance of near-term cuts, the dollar fell by the most in three weeks, and gold hit a record high as investors shifted to safe havens

Market Summary: Powell Confronts Trump Administration Over Fed Independence

Key Developments

Federal Reserve Chair Jerome Powell publicly disclosed that the Justice Department issued subpoenas threatening criminal indictment over his congressional testimony regarding cost overruns on a Fed building renovation project. Powell directly stated this is a "pretext" for the White House to gain influence over interest rate policy, marking a significant escalation in tensions between the Fed and President Trump's administration.

Political Response

Republican Senator Thom Tillis of the Senate Banking Committee pledged to oppose all Trump Fed nominees, including Powell's successor, until the matter is resolved. Trump denied knowledge of the threatened indictment, though the administration confirmed the subpoenas.

Market Impact

Immediate reactions were relatively contained:

• Treasury yields and rate markets showed slightly higher probability of near-term rate cuts
• The dollar fell the most in three weeks against a basket of currencies
• Gold reached record highs as investors sought safe havens
• Swiss franc strengthened against the dollar
• Asian equities, particularly Chinese stocks, reached 10-year highs driven by AI and aerospace sectors

Additional Market Movers

Iran Protests: Over 500 killed and 10,000 arrested in ongoing demonstrations. Oil prices remained relatively muted despite Iran's 3+ million barrels per day production and Strait of Hormuz concerns. Brent and WTI posted their largest weekly gains since October, up over 3%.

Financial Sector: Trump proposed a one-year cap on credit card interest rates at 10%, pressuring bank stocks including Barclays.

Outlook

Multiple Fed officials scheduled to speak, including Williams, Barkin, and Bostic. Markets remain focused on Fed independence concerns and geopolitical risks.