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The Federal Reserve came under siege from the White House on Monday, rattling US dollar markets.
The war of words between Donald Trump and the Federal Reserve escalated in dramatic fashion to start the week, as the US Justice Department served grand jury subpoenas and threatened to indict chair Jerome Powell. All this was supposedly over the Fed’s recent building work, although the president did let slip that the decision to launch criminal inquests came as a consequence of Powell’s watchful approach to interest rates.
Safe-haven metals gold and silver reached towards fresh records on Monday. Meanwhile, the US dollar sank by more than half a cent against both the pound and the euro.
A group of former Fed chairs, including Janet Yellen, Ben Bernanke and Alan Greenspan, issued a sharply worded rebuke of the proceedings against Powell yesterday evening. In a joint statement, the group likened the Trump administration’s actions to those of an emerging market and argued they had “no place in the United States, whose greatest strength is the rule of law, which is at the foundation of our economic success.”
It’s been a wild start to 2026. You can find plenty more analysis of the dizzying geopolitical picture, and fragile economic recovery, and the key events set to dominate the next few months in our latest Quarterly Forecast. You’ll be able to access your copy when our emails hit your inbox later this morning.
The row between the UK government and X (formerly Twitter) over indecent AI-generated materials rumbled on. Media regulator Ofcom opened an investigation into its content, a move Elon Musk decried as “censorship”. The UK government later unveiled plans to ban explicit content created without consent.
As if there wasn’t enough going on right now, we’re entering “earnings season” and a host of major companies are set to report on their performance. Banks are expected to confirm the best year for their investment banking divisions since the pandemic, while Alphabet became the fourth tech firm to hit a $4 trillion market valuation.
Today’s main event will be this afternoon’s US inflation report, but keep an eye out as well for any further movement in the Jerome Powell saga, as well as news concerning Greenland and Venezuela.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Tailwinds boost pound
Sterling staged something of a rally on Monday, surging ahead against the US dollar and threatening to retake last week’s high against the euro. As investors fled a febrile US dollar, the pound is benefitting from some promising tailwinds and a soft improvement in sentiment. Those trends will be tested on Thursday morning with November’s growth data.
GBP/USD: the past year
EUR: Uncertain ECB outlook
Rather than provide clarity, last week’s European inflation reports muddled the picture for the European Central Bank (ECB) somewhat. With headline inflation falling below target in large member-state economies, the euro was weighed down a little to start the week as investors assessed the possibility that the ECB may even have to cut interest rates again this year.
GBP/EUR: the past year
USD: Politics creeps further into Fed
US dollar investors have long worried about the prospect of the White House trampling over the Federal Reserve’s independence. Political pressure on rate-setters eroded confidence in the dollar last year, but the latest salvo marked a new phase altogether. There is a risk of further volatility this afternoon with the release of fresh inflation data, an interesting one given the chance the next chair will be an ultra-dove.
EUR/USD: the past year
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