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13/01/2026 - 07:26 UTCThe USDX retreated from its one-month highs on Monday, closing -0.31% lower as intensifying concerns over the Federal Reserve’s independence began to weigh on the Greenback. The decline follows reports that the Department of Justice has escalated a criminal investigation into Fed Chair Jerome Powell, specifically regarding his testimony on a $2.5 billion headquarters renovation project. Powell has publicly pushed back, characterizing the subpoenas as "pretexts" for political pressure from the White House over interest rate policy. This unprecedented legal tension has introduced a layer of uncertainty into the U.S. monetary outlook, partially offsetting the momentum gained from last week’s rally.
In addition to the legal drama, investors are grappling with a shifting leadership landscape as President Trump prepares to announce a successor for Powell, whose term expires in May 2026. Market participants are increasingly wary of how these political developments might influence the Fed's "go-slow" approach to rate cuts, especially after December's modest job growth figures. With the USDX now trading near 98.73, the focus shifts decisively to Tuesday's Consumer Price Index (CPI) report.
As of 05:43 AM GMT Tuesday, Asian equity markets presented a mixed performance; the China SSE fell -0.28%, the China SZSE dropped -0.75%, and the Japan 225 declined -0.45%, while the Hong Kong 50 managed a slight gain of 0.13%. This cautious start follows a significant surge in Chinese technology giants during their latest trading session, where Alibaba jumped 10.16%, Baidu climbed 6.08%, and Tencent rose 0.52%.
General Asia news highlights that while regional markets initially took a positive lead from record highs on Wall Street, Tuesday's early trade saw some consolidation as investors turned their attention to upcoming U.S. inflation data. In Japan, despite the early dip, sentiment remains supported by reports that Prime Minister Sanae Takaichi may call for a snap election as early as February. This move is viewed by market participants as a potential catalyst for expanded fiscal stimulus, which recently helped the Nikkei hit record intraday highs above 53,000 as trade resumed from a holiday weekend.
China news remains focused on the artificial intelligence sector, where optimism has fueled a massive rally for the country's "AI tigers" and established tech leaders. While the mainland China SSE and China SZSE saw early weakness on Tuesday, the broader sentiment in Hong Kong has been bolstered by successful new listings and strong gains from Alibaba and Baidu. Additionally, the electric vehicle sector saw a boost after the European Union provided a framework for Chinese firms to potentially avoid certain import tariffs, aiding companies like BYD.
The main US equity indices achieved record-high closes on Monday, as strength in the technology sector fueled a broader market recovery. Despite an early dip in futures this Tuesday ahead of the upcoming CPI report, the primary market focus has shifted to the start of the fourth-quarter earnings season. JPMorgan Chase and Bank of New York Mellon are scheduled to kick off results on Tuesday, with analysts anticipating solid year-over-year revenue and EPS growth. These reports will serve as a critical gauge for how corporate America navigated the economic and geopolitical disruptions of late 2025.
In individual stocks, the financial sector is under significant scrutiny following a recent social media post by President Trump calling for a one-year 10% cap on credit card interest rates starting January 20. This proposal, aimed at curbing "ripped off" rates in the 20% to 30% range, has sparked concerns over regulatory risks and potential impacts on net interest margins. Shares of major credit issuers like American Express, Capital One, and Citigroup previously faced pressure on this news, and investors will be listening closely for management commentary during this week’s earnings calls from Bank of America and Citigroup.
Beyond the CPI report, investors are closely watching the December Producer Price Index (PPI) to determine if cooling inflationary pressures will allow for a more accommodative Federal Reserve policy path in 2026. Simultaneously, upcoming Retail Sales and jobless claims data will offer a vital pulse check on the resilience of the American consumer and the overall strength of the labor market.
The EUR/USD pair is trading in a narrow range near 1.1665 during early Asian hours on Tuesday, as markets absorb heightened political uncertainty surrounding the US Federal Reserve.
The US Dollar remains under pressure following reports that the Trump administration has threatened legal action against the Fed. According to Reuters, the US Justice Department is examining whether Fed Chair Jerome Powell may face criminal issues linked to his June testimony before the Senate regarding the central bank’s building renovation project. Powell has dismissed the allegations as a “pretext,” arguing they are intended to pressure the Fed into lowering interest rates.
Concerns over political interference in the US central bank have weighed on investor confidence in the Dollar, offering modest support to the euro.
On the euro side, expectations that the European Central Bank is nearing the end of its rate-cutting cycle are providing some underlying support to the single currency. ECB Vice President Luis de Guindos said last week that interest rates are currently at an appropriate level, while cautioning that geopolitical developments continue to pose “enormous uncertainty.”
Later on Tuesday, attention will turn to the release of US Consumer Price Index data for December. Both headline and core inflation are forecast to rise 2.7% year-on-year. A stronger-than-expected reading could help cap near-term losses in the Greenback.
Gold surged to a record high above $4,600 per ounce on Monday, while silver also hit a fresh peak, as investors flocked to safe-haven assets amid mounting political uncertainty surrounding a potential criminal probe into Federal Reserve Chair Jerome Powell by the Trump administration.
Gold gained more than 64% last year, marking its strongest annual performance since 1979. Silver outperformed even further, posting a record annual gain of 146.8%.
Investor demand has been bolstered by escalating pressure from the Trump administration on the Federal Reserve.
The Federal Reserve is widely expected to keep interest rates unchanged at its January 27–28 meeting, following cumulative rate cuts of 75 basis points last year. However, markets continue to price in two additional rate cuts later this year, a dynamic that has further supported demand for non-yielding assets such as gold.
Geopolitical risks also remained elevated, with President Trump weighing potential responses to a deadly crackdown on protests in Iran, following his removal of Venezuelan President Nicolás Maduro and renewed discussion around the possible acquisition of Greenland.
Oil prices extended their rally during Asian trading on Tuesday, rising for a fourth straight session as escalating unrest in Iran heightened concerns over potential supply disruptions.
In the previous session, Brent touched a more than seven-week high, while WTI rose to its strongest level in a month.
Geopolitical risks remained firmly in focus after Iran, a key OPEC producer, was hit by its largest wave of anti-government protests in years. The demonstrations have been marked by widespread violence and reports of heavy casualties as security forces moved to suppress unrest.
US President Donald Trump warned that Washington could consider military action if Iranian authorities continue to use lethal force against protesters. Trump also announced plans to impose a 25% tariff on any country “doing business” with Iran, a move aimed at tightening economic pressure on Tehran.
Supply concerns were not limited to the Middle East. Russia’s oil export infrastructure has faced repeated disruptions amid the ongoing war in Ukraine, with Ukrainian forces targeting key energy facilities and export hubs.
US equities closed at record highs on Monday, with gains in technology stocks helping to drive a broader market recovery despite rising concerns over Federal Reserve independence following the Trump administration’s latest escalation against Fed Chair Jerome Powell.
Markets continued to grapple with mounting political scrutiny of the Federal Reserve after Powell confirmed late Sunday that federal prosecutors have opened a criminal investigation related to his June testimony before the Senate Banking Committee on renovations to Fed office buildings. Powell suggested the move was politically motivated, tied to repeated demands from the Trump administration for aggressive interest rate cuts.Powell said the latest threat is not about his past testimony or Fed renovations, but about political pressure undermining the central bank’s ability to set interest rates independently.
Investor attention now turns to a busy slate of economic data, led by the release of US Consumer Price Index figures for December on Tuesday. Headline inflation is expected to remain steady, while core CPI is forecast to edge slightly higher.
Fourth-quarter earnings season is also set to begin in earnest, with major US banks among the first to report. JPMorgan Chase and Bank of New York Mellon are scheduled to release results on Tuesday, followed by Bank of America, Wells Fargo and Citigroup on Wednesday. Morgan Stanley, Goldman Sachs and BlackRock are due later in the week.
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