Markets Shaken by the Trump Administration
— Focus on Iran Tensions and Risks to Fed Independence
From last weekend into the start of this week, a series of headlines surrounding the Trump administration has once again made financial markets highly sensitive.
In particular, attention is centered on growing concerns over the independence of the Federal Reserve, as well as the administration’s increasingly hardline foreign policy stance (Iran and the Greenland issue).
◆ Intensifying Pressure on the Fed and the Risk to Central Bank Independence
Fed Chair Jerome Powell stated that:
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“The Department of Justice under the Trump administration has issued a subpoena to the Federal Reserve,”
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and that this is “an unprecedented and political move.”
The dispute centers on allegations that:
“Congress may have been misled at the Senate Banking Committee in June last year”
regarding the scale and cost of the Fed headquarters renovation.
Markets view this as an extension of President Trump’s persistent attacks on the Federal Reserve,
and are increasingly pricing it as a direct risk to central bank independence.
◆ Trump Administration’s Hardline Foreign Policy
Geopolitical headlines have also turned increasingly ominous.
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Wall Street Journal:
“The U.S. is accelerating planning for potential action against Iran.” -
Daily Mail (UK):
“President Trump instructed special forces to prepare plans for an invasion of Greenland.”
Both reports suggest a heightened possibility of military action and an aggressive policy direction.
◆ Initial Market Reaction
Following these reports, markets at the start of the week showed the following moves:
FX Market
Broad USD selling pressure
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EUR/USD: from the low 1.16s → to the upper 1.16s
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GBP/USD: from below 1.34 → to the mid-1.34s
USD/JPY
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Early Asia: rose toward 158.20
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After Trump-related headlines: plunged into the 157.50 area
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Currently: choppy trading around 158.00
Yen Crosses
The underlying weak-yen trend remains intact:
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EUR/JPY: from the high 183s → attempting to move into the mid-184s
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GBP/JPY: from the high 211s → into the low 212s
◆ Precious Metals Surge
Driven by geopolitical risk and fears over Fed independence, both gold and silver hit new record highs.
Capital inflows are being fueled by:
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Demand for safe-haven assets during crises
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The role of precious metals as alternatives to a weakening USD
◆ Key Themes Ahead
In overseas markets, the following remain core drivers:
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Further developments from the Trump administration
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Geopolitical risks involving Iran and Greenland
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The trajectory of pressure on Fed independence
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Reactions in U.S. equities and U.S. Treasury markets
For the yen, markets are also watching:
“Speculation about an early dissolution of the House of Representatives under Prime Minister Takaichi.”
◆ Dollar Index: Battle Around the 200-Day Moving Average
In the London session, the Dollar Index pulled back:
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High: 99.246
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Low: 98.719
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200-day MA: 98.817 (broken again)
As political pressure on the Fed intensified, the following moved simultaneously:
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U.S. Treasury prices lower
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U.S. equity futures lower
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The USD weaker
🔎 Summary
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The Trump administration is once again at the center of market volatility
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Risks to Fed independence are becoming a medium- to long-term headwind for the USD
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Geopolitical tensions are strongly supportive for precious metals
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FX markets are entering a complex phase:
“USD uncertainty × persistent JPY weakness.”
This combination is likely to define market behavior in the near term.
