Trump Administration's Challenge to Federal Reserve Chief Sparks Market Uncertainty

The dollar sustained losses following the U.S. administration's criminal investigation into Federal Reserve Chair Jerome Powell, raising concerns about the Fed's independence. The probe, criticized by former Fed chiefs, intensifies pressure on the Fed to reduce rates faster, leading to a measured market selloff, increased demand for safe assets, and questions about the Fed's autonomy.

The dollar stayed under pressure on Tuesday as the Trump administration initiated a criminal inquiry into Federal Reserve Chair Jerome Powell, raising concerns over the central bank's independence and the confidence in U.S. financial assets.

Investors were still absorbing the shocking weekend revelation of the investigation, which drew criticism from former Federal Reserve heads and marked a significant escalation in the presidential campaign to urge faster rate cuts from the Fed. The market response involved selling off the dollar and U.S. Treasuries, while some investors turned to gold for safety.

Despite the political tensions, the market reactions were restrained compared to the sell-offs following last year's tariff announcements. Meanwhile, currency strategists offered mixed forecasts, with external factors like Japan's political climate affecting the yen, while U.S. Treasury yields saw minor fluctuations.