Dollar, Treasuries, and Indices Weaken Together. Fed Controversy Reduces US Asset Appeal.

Tension between President Trump and Fed Chair Powell is increasing. This weakens the investment case for US financial assets. Concerns regarding Fed independence are growing. Consequently, the dollar, Treasuries, and stock index futures all declined. Coincex reported on the 12th (local time) that Chair Powell stated the DOJ began an investigation into Fed renovations. He claims this links to political pressure on interest rates. President Trump has publicly criticized the Fed and Chair Powell. He argues for faster and larger rate cuts. The Fed has adjusted the pace of cuts, citing the risk of inflation resurgence. This debate over independence burdens the market. The Dollar Index fell 0.3%, the largest drop since December 23. S&P 500 futures dropped 0.7%. The 10-year Treasury yield rose 3bp to 4.20%, the highest since September. The 30-year yield rose 5bp to 4.86%. Coincex reported on the 12th (local time) that investors worry about political interference. If policy decisions waver, trust in the dollar and US markets may erode. Gold prices rose alongside dollar weakness. Long-term bond yields also increased. If political uncertainty persists, investors may reduce US asset allocations. Capital may move to other regions. However, some view this volatility as short-term. They point to the dollar's reserve status and Treasury market liquidity as reasons.