Fed Turmoil Persists; Corporates See Strong Gains

The EUR/USD slipped in Wednesday’s Asian session, pressured by renewed political uncertainty in France and a firmer U.S. Dollar.

The euro weakened as concerns grew over the survival of Prime Minister François Bayrou’s minority government. All three opposition parties have indicated they will not support his €44 billion budget proposal in the September 8 confidence vote.

Meanwhile, the U.S. Dollar held relatively steady, though uncertainty clouds its outlook after President Donald Trump announced the dismissal of Federal Reserve Governor Lisa Cook over alleged mortgage irregularities. Cook rejected the move, arguing the president lacks the authority to remove her, raising fresh questions about the Fed’s independence.

On Tuesday, the EUR/USD pair traded within a narrow range, holding above 1.1600 but capped near the 1.1660 region. Sentiment worsened in the U.S. session after Trump threatened new tariffs on countries implementing digital taxes on American tech firms. In a post on Truth Social, he warned that unless such measures are withdrawn, “substantial additional tariffs” would be imposed on those nations’ exports to the U.S.

With a light macroeconomic calendar this week, markets remain largely driven by political and fiscal headlines. The key data release ahead is the U.S. Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, due Friday.

Gold prices held firm near $3,400 per ounce on Tuesday, supported by a softer U.S. dollar and renewed concerns over the Federal Reserve’s independence after President Donald Trump’s unprecedented decision to dismiss Governor Lisa Cook. The move, which could test the limits of presidential authority over the central bank, unsettled investors and drove safe-haven demand for the yellow metal.

The precious metal also drew additional support from a retreat in U.S. Treasury yields, particularly in the short and intermediate maturities, reversing Monday’s brief uptick. Lower yields reduce the opportunity cost of holding non-yielding assets such as gold, making the metal more attractive to investors seeking stability.

Meanwhile, expectations of monetary easing remained a dominant theme in the market. Fed Chair Jerome Powell’s dovish remarks at Jackson Hole last week, where he flagged rising risks to the labor market, were reinforced by disappointing economic data. July’s durable goods orders fell 2.8%, while consumer confidence weakened in August, pointing to softer momentum in the U.S. economy. These signals bolstered market bets that the Fed could begin cutting rates as soon as September, with futures pricing in an 87% probability of a quarter-point reduction.

Against this backdrop, gold continues to benefit from its dual role as a hedge against both inflation and financial instability. In a low-rate environment, the appeal of the non-yielding asset strengthens, while heightened political and economic uncertainty adds to safe-haven flows.

Oil prices slipped on Tuesday, giving back the previous session’s gains, as markets weighed U.S. tariff developments, the war in Ukraine, and risks to Russian fuel supplies. The pullback came a day after Brent touched its highest level since early August.

Monday’s rally was fueled by concerns over supply disruptions following Ukrainian strikes on Russian energy infrastructure and the prospect of additional U.S. sanctions targeting Russian oil exports.

Ukraine’s counterattacks against Russian advances—including strikes on gas and power facilities—have disrupted refinery operations, curbing Moscow’s processing capacity and sparking localized fuel shortages. In response, Russia has increased its planned August crude exports from western ports by 200,000 barrels per day, according to sources familiar with the matter.

On the diplomatic front, U.S. President Donald Trump renewed threats of sanctions against Russia should no progress be made toward a peace deal within two weeks. However, sources told Reuters that U.S. and Russian officials have also quietly discussed potential energy agreements during ongoing negotiations.

Trade tensions added another layer of uncertainty. Indian exports may soon face U.S. duties of up to 50%, one of Washington’s steepest tariff levels to date.

U.S. stocks closed higher Tuesday, with strength in health care and technology helping offset concerns about Federal Reserve independence just one day before Nvidia’s closely watched earnings report.

Investor sentiment was tempered by political developments after President Donald Trump announced the immediate removal of Fed Governor Lisa Cook late Monday, citing allegations of mortgage fraud. Cook has denied the claims and said she intends to challenge the dismissal in court.

Health care stocks provided a strong boost, led by Eli Lilly, which surged more than 5% after reporting that its once-daily weight-loss pill met primary and secondary trial goals. The company said it plans to seek global regulatory approval this year.

Consumer confidence slipped to 97.4 in August, down from a revised 98.7, but still better than forecasts. Meanwhile, non-defense capital goods orders excluding aircraft rose 1.1% in July, signaling solid business investment after a decline in June.

Investors are awaiting Thursday’s release of the second estimate of Q2 GDP and weekly jobless claims. HSBC economists expect GDP growth to be revised up to 3.2% from 3.0%.

Nvidia will report quarterly results Wednesday, with Wall Street projecting a 48% jump in earnings per share on revenue of $45.9 billion, according to LSEG data. The stock is seen as a key gauge for sentiment around artificial intelligence, an area that has faced renewed investor skepticism in recent weeks.

Meanwhile, Apple confirmed that it will unveil its iPhone 17 at a launch event next month, adding to investor focus on the tech sector.