Menu

The US dollar declined on Monday, unwinding Friday’s gains as mounting concerns over the independence of the Federal Reserve shook investor confidence. 

Yahoo Finance reported the US Dollar Index fell by 0.36% at its open on Monday.

Reports that federal prosecutors have opened a criminal investigation into Federal Reserve Chair Jerome Powell raised the alarm about political interference in monetary policy.
 
“Such actions risk undermining the Fed’s credibility and its ability to set interest rates based on economic conditions rather than political considerations,” said Frank Walbaum, Market Analyst at Naga. “The developments appear to be another attempt by the US administration to pressure the central bank into aligning its monetary policy with Trump’s preferences. The latter could introduce additional risk in the market. US Treasury yields could also be vulnerable to heightened volatility, as uncertainty surrounding the Fed's independence could prompt erratic moves in bond markets.”

In a note, Nigel Green, CEO of deVere Group, said the independence of the Federal Reserve, the world’s largest economy’s central bank, is under attack and markets won’t stand for it.
 
Fed Chairman Jerome Powell said he is now under federal criminal investigation related to the $2.5 billion renovation of the central bank’s headquarters and his congressional testimony about it.

Green said, “This appears to be thinly veiled pressure on the Chair from the pressure about interest rates, which Trump has long been championing to be cut, and not about a refurb at the Fed’s HQ,” adding that using legal mechanisms to lean on the leadership of the Federal Reserve crosses a line that matters enormously to markets.