Dollar Suddenly Weakens — Markets Fear Political "Meddling" with the Fed?
The US dollar weakened on Monday, with the dollar index dropping to around 98.9, snapping a four-day rally. This weakening occurred after news emerged that federal prosecutors had opened a criminal investigation into Fed Chairman Jerome Powell, which immediately raised concerns about the central bank's independence.
The market picked up on signals that political pressure could interfere in interest rate policy. Powell himself considered the threat of criminal charges merely a "pretext" to push the Fed to align with the Trump administration's preferences.
Investors' biggest concern is that if the Fed's independence is compromised, interest rate decisions could no longer be based purely on economic data, but influenced by political interests. This has led investors to reduce their positions in the dollar.
The dollar is also being pressured by expectations of additional interest rate cuts this year. After Friday's nonfarm payrolls report showed lower-than-expected job growth, the market is again betting that the Fed will continue to cut interest rates.
The next focus this week will be the latest inflation data and major bank performance reports, which could shift the direction of interest rate expectations. Beyond that, the market is also weighing geopolitical risks, particularly the escalating protests in Iran and growing uncertainty in South America.
5 Key Points:
- The dollar index fell to around 98.9, ending a four-day rally.
- The main cause: concerns about the Fed's independence following the Powell-related investigation.
- Powell considers the threat of indictment a "pretext" to curb interest rate policy.
- Weaker US jobs data keeps rate cut expectations strong.
- The market awaits inflation and bank earnings data, while being wary of geopolitical risks from Iran and South America. (asd)
Source: Newsmaker.id
