Trump vs. the Fed: a dangerous strategy that can break the market

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

Judicial pressure on the Fed Chair calls into question one of the key pillars of the U.S. financial system — the independence of the monetary regulator. Market reaction was swift: the dollar weakened, while demand for safe-haven assets increased. Investors began pricing in political risk that goes beyond standard macroeconomic factors.

The crypto market also went through a kind of stress test. On January 12, Bitcoin briefly demonstrated behavior close to that of defensive assets: amid rising prices for precious metals, BTC climbed by approximately 1.6%, to the area of $92,300. This intensified the discussion about the role of digital assets as a hedge against political instability.

The Anatomy of the Conflict

Since his inauguration, Donald Trump has repeatedly publicly criticized (and humiliated!) Jerome Powell for refusing to accelerate interest rate cuts, called for his resignation, and subsequently initiated a criminal investigation through the U.S. Attorney’s Office for the District of Columbia. The formal pretext was alleged violations in expense reporting related to the renovation of the Fed’s office in San Francisco.

Powell reasonably interpreted the actions of the Department of Justice as a continuation of pressure from the White House. The Fed Chair emphasized that threats of criminal prosecution are a reaction to an independent monetary policy based on economic data rather than political directives. Recall that Powell has been a member of the Federal Reserve Board of Governors since 2012, and his term expires in May 2026.

Market and Institutional Risks

The investigation, approved back in November, includes an analysis of Powell’s public statements and an audit of financial reports. The process triggered sharp criticism from Democrats and part of Trump’s own team.

• Resistance from Republicans may complicate the confirmation of a new Fed Chair, even if the candidate is personally selected by the president.
• Escalation of the conflict carries the risk of a multiple increase in volatility — not only in equity markets, but also in the digital asset segment. Undermining confidence in the dollar and the Treasury market strengthens interest in decentralized and less controllable instruments.
• Against the backdrop of record gold prices, Bitcoin’s reaction looked relatively restrained — around +1.7%. This may reflect a more sober assessment of fundamental risks, taking into account liquidity, risk premia, and the positioning of major market participants.
• An additional factor was the emergence of information about preparations for a joint statement by global central banks in support of Powell. The document, presumably under the auspices of the Bank for International Settlements, may be opened for signing by regulators and financial supervisory authorities that view the process as unlawful pressure on the Fed.

Further escalation of the conflict could sharply increase volatility and alter the structure of global capital flows.

As the conflict develops, cryptocurrencies and the euro are increasingly viewed as additional hedges against political risk.

If pressure on the Fed ceases to be a one-off political episode and transitions into a persistent phase, markets will face a force majeure scenario. In such an environment, liquidity and fear will take priority, and investment decisions will become speculative rather than strategic.

So we act wisely and avoid unnecessary risks.

Profits to y’all!