Trump vs. the Fed: the president’s failed strategy

EUR/JPY

Key zone: 185.00 - 186.00

Buy: 186.30 (on a pullback after retesting 185.00) ; target 187.50-188.00; StopLoss 185.80

Sell: 184.70 (on strong negative fundamentals) ; target 183.50-182.50; StopLoss 185.30

A lawsuit against the Chair of the Federal Reserve calls into question one of the core principles of the U.S. financial system — independence. Markets reacted immediately: the dollar weakened, and demand for defensive assets increased.

The crypto market also received a “stress test” for its role in crisis scenarios as a potential hedge against political risk. On January 12, Bitcoin briefly demonstrated behavior similar to safe-haven assets: the price rose by approximately 1.6% to around $92,300 at a moment when precious metals were also rising.

Reminder:

Since his inauguration, Trump has repeatedly and publicly criticized (and personally insulted) Jerome Powell for refusing to accelerate interest-rate cuts, called for his resignation, and — as a final argument — forced the District of Columbia prosecutor’s office to open a criminal investigation against him on charges of fraud and false testimony. Officially, the case was opened due to alleged violations in reporting expenses related to the renovation of the Federal Reserve’s San Francisco office.

It is entirely logical that Powell viewed this move by the Department of Justice as a continuation of pressure from the White House. The current Fed Chair stated that threats of criminal charges are a consequence of the monetary regulator setting interest rates based on real economic data, rather than instructions from the president or other government representatives.

Reminder: Jerome Powell has been a member of the Federal Reserve Board of Governors since 2012, and his term expires in May 2026.

• The investigation, which includes analysis of Powell’s public statements and a review of expense reports, was approved back in November. The proceedings against Powell have triggered serious criticism among Democrats, and even among some members of Trump’s own team. Resistance from Republicans could interfere with the confirmation of a new Fed Chair personally selected by Donald Trump.
• Volatility risks rising severalfold, not only in equity markets but also in digital assets. Trump risks breaking the entire stable system of the dollar and Treasury securities in favor of decentralized, uncontrolled assets that are difficult to manipulate.
• Notably, against the backdrop of record gold prices, Bitcoin’s reaction appeared more restrained — around +1.7% at the moment markets were digesting the news of the lawsuit. However, the relatively weak response may be driven by a reassessment of fundamental risks, adjusted for liquidity, risk premium, and positioning by large players.
• There is information that representatives of global central banks are working on a statement expressing solidarity with Powell and viewing the criminal proceedings as unlawful pressure on the Federal Reserve. It is expected that the joint statement will be published under the auspices of the Bank for International Settlements and opened for signature by all central banks and various financial supervisory authorities.
• If Trump’s aggression toward the Fed materializes and ceases to be a one-off political episode, it will constitute a critical force majeure for financial markets. Scenarios will become relevant in which liquidity and fear outweigh any ideological narratives, and investors think speculatively rather than strategically.

And the more the market doubts the independence of the Federal Reserve, the more frequently both the euro and cryptocurrencies will be used as additional hedges alongside classical defensive assets.

So we act wisely and avoid unnecessary risks.

Profits to y’all!