Forex : US dollar loses steam as Powell faces pressure and global tensions rise

⚡MarketPrimes Fast

• The US dollar weakened against major currencies following political interference concerns targeting the Fed.
• Jerome Powell is under criminal investigation, raising questions about central bank independence.
• Despite receding expectations for rate cuts, Friday’s job data failed to strengthen the Greenback.
• Geopolitical risks in Iran and Ukraine may offer temporary support for the US currency.
• Gold prices surged to record levels amid safe-haven demand and central bank uncertainty.

AI-generated key points

Tensions around the Fed shake confidence in the dollar

Early trading on Monday saw the US dollar retreat from its recent monthly highs, with pressure mounting not from economic fundamentals but from the political sphere. While investor expectations for an imminent rate cut have cooled following modest employment data, the focus has shifted to a more institutional concern: the independence of the Federal Reserve.

At the center of the controversy is Jerome Powell, now subject to a criminal investigation related to the renovation of the Fed’s Washington headquarters and the congressional testimony he gave on the matter. According to Powell, the investigation appears to be politically motivated, with the renovation acting as a pretext for a broader attack on the central bank’s autonomy.

Labor data fails to lift the Greenback

The latest US employment report, released Friday, showed a modest gain of 50,000 jobs in December slightly below expectations. November’s figures were also revised downward. Nonetheless, unemployment edged lower to 4.4%, marking a small recovery from the previous four-year high.

These figures were not enough to counterbalance the institutional concerns surrounding the Fed. Even in the absence of aggressive rate-cut pricing, the dollar’s weakness reflects investor unease over a shift in the balance between economic governance and political influence.

Currency shifts highlight investor discomfort

The dollar’s pullback was broadly felt. Losses were most pronounced against the Swiss franc, which gained 0.35%, reflecting a familiar rush toward perceived safe havens. The euro and British pound also advanced, with EUR/USD pushing toward 1.1700 and GBP/USD reclaiming levels above 1.3400.

Asian currencies told a more nuanced story. The Japanese yen briefly weakened, despite a risk-averse market backdrop, as political speculation in Tokyo centered around potential early elections added to local uncertainty. Meanwhile, the Australian dollar managed a modest recovery, underpinned by hawkish expectations from the Reserve Bank of Australia.

Global flashpoints inject volatility

Political uncertainty wasn’t confined to the United States. Weekend reports revealed that President Trump is considering military options in Iran amid ongoing civil unrest. The potential for escalation has added a fresh layer of tension to already fragile global markets.

Simultaneously, the situation in Ukraine intensified. Russia’s deployment of a new hypersonic ballistic missile the Oreshnik prompted an emergency meeting at the United Nations Security Council. While not yet a direct market-moving event, the backdrop is undeniably contributing to increased risk aversion and safe-haven flows.

Gold hits fresh records while oil falters

Against this volatile backdrop, gold extended its rally, touching a new record of $4,601 in Asian trading before settling back near $4,475. Investor demand for alternatives to fiat currencies has grown steadily, fueled both by institutional instability and broader geopolitical anxiety. Silver also spiked, briefly testing the $84 level.

Meanwhile, oil prices struggled to hold momentum. WTI crude once again approached the $59.60 mark but failed to break higher. Market attention is split between resumed Venezuelan exports and widespread protests in Iran, leaving energy traders hesitant to commit strongly in either direction.