President Trump is challenging Fed Chair Powell’s position, suggesting he could remove him despite lacking legal authority. The administration is investigating whether Powell could be dismissed “for cause,” claiming his policies are politically motivated.
This controversy has hurt U.S. markets with the dollar falling to three-year lows, Treasury outflows increasing, and stock indices declining. The S&P 500 dropped 2.3% and Nasdaq fell 2.9% last week.
Gold has reached a record $3,395/oz, up 29% year-to-date, as investors seek safe havens amid Fed independence concerns and trade tensions.
Markets expect 3-4 rate cuts this year with the first possibly coming in June, though analysts believe the Fed will likely wait until Q4 and deliver fewer cuts as they balance inflation with growth concerns.
U.S.-China trade negotiations remain uncertain, with China warning other countries against deals with the U.S. that might harm Chinese interests.
This week, markets will focus on global PMI data, U.S. housing reports, consumer sentiment figures, the Fed’s Beige Book, and China’s interest rate decision.