Closing Recap 

Global markets are on edge to start the new week after an extraordinary weekend escalation in the feud between the White House and the Federal Reserve. U.S. stock futures are pointing to a sharply lower open after Fed Chair Jerome Powell revealed that the Department of Justice has threatened the central bank with a criminal indictment and served grand jury subpoenas, a move he described as politically motivated. The news has ignited fears about the Fed’s independence, sending the U.S. dollar tumbling and sparking a massive flight to safety. 

Gold and silver have surged to new all-time highs, while U.S. Treasury yields are climbing as institutional risk is priced back into the market. Geopolitical tensions are also flaring, with Iran warning of retaliation for any U.S. attack, further supporting oil and precious metals. 

Key Takeaways 

• Powell vs. Trump Explodes: Fed Chair Powell’s revelation of a DOJ criminal probe has rocked markets, raising serious concerns about the Fed’s independence from political pressure from the Trump administration, a move he alleges is politically motivated, sending a wave of uncertainty across global markets. 
• Massive Flight to Safety: The news triggered a massive flight to safety, with gold and silver surging to new all-time highs. Spot gold jumped as much as 2% to a record peak above $4,600 an ounce. 
• Dollar Tumbles, Futures Fall: The U.S. Dollar Index fell sharply as the institutional credibility of the Fed was called into question. U.S. stock futures are pointing to a significantly lower open. 
• Yen Paradoxically Weakens Despite Risk-Off: In a notable divergence, the Japanese Yen is weakening despite the risk-off mood. The currency is being weighed down by domestic political uncertainty and the prospect of a snap election.
• Fed Leadership in Chaos: The political fallout has been immediate, with a key Republican senator vowing to block all Fed nominees until the probe is resolved, creating a leadership vacuum at the central bank. 
• Rate Cut Bets Pushed Back: The softer-than-expected December NFP report on Friday, combined with the new political uncertainty, has led several major banks to push back their forecasts for the next Fed rate cut to mid-2026. 
• December Fed Cut Bets Wane After Jobs Data: Last Friday’s soft-but-not-disastrous jobs report has caused markets to pare back bets on a December rate cut. Odds have fallen to 45%, a sharp reversal from over 60% a week ago, with major banks like JPMorgan now forecasting no cuts at all in 2026.
• Oil Steadies, Bitcoin Bounces: WTI Crude Oil is holding steady near $59, with traders weighing supply risks from Iran against the prospect of increased Venezuelan output. Bitcoin is showing signs of life, rallying over 1.5% as it benefits from the weaker dollar.
• Geopolitical Tensions Escalate: Rising anti-government protests in Iran and the U.S. stepping up contingency planning are adding to the risk-off mood and providing a strong bid for crude oil. 
• Bullish S&P 500 Targets for 2026 Emerge: Despite recent volatility, major Wall Street banks like Morgan Stanley are rolling out very bullish 2026 targets for the S&P 500, with some calling for a move to 7,800. 
• Silver Hits Another Record High: In a sign of the powerful flight to hard assets, Silver has surged over 3.5% to a new all-time high, benefiting from both safe-haven demand and a weaker dollar.
• All Eyes on U.S. CPI: With the Fed’s credibility under fire, this week’s key U.S. December CPI report on Tuesday has taken on even greater importance. 

Market Overview

The new trading week has begun with a political bombshell that has sent shockwaves through global markets. Federal Reserve Chair Jerome Powell’s extraordinary public statement, detailing what he alleges is a politically motivated criminal probe by the Department of Justice, has brought the long-simmering conflict between the White House and the central bank to a boiling point. The market’s reaction has been swift and severe: a classic flight to safety. Investors are dumping the U.S. dollar and piling into hard assets like gold and silver, which have exploded to new record highs. 

Index	Up/Down	%	Last
DJ Industrials	-197	-0.40%	49,525 (Futures)
S&P 500	-27.8	-0.40%	6,974 (Futures)
Nasdaq	-181	-0.70%	25,766 (Futures)
Russell 2000	(N/A)	–	2,603

This institutional crisis is a major new risk factor for a market that was already grappling with a complex macro outlook. While last Friday’s soft jobs report initially bolstered hopes for more Fed easing, the new political turmoil has thrown everything into question. Several major banks, including Barclays and Morgan Stanley, have already pushed back their forecasts for the next rate cut, and the probability of a January cut has now plunged to just 4%. The situation is highly fluid, but the immediate implication is a period of heightened volatility and a significant repricing of risk. The Fed’s independence has been a cornerstone of the U.S. financial system’s stability, and any perceived threat to that independence is a major bearish catalyst.

Economic Calendar 

With Japanese markets closed for a holiday, today’s session is being driven by the major geopolitical and political headlines. The focus for the week will be on the U.S. CPI report. Data Released Friday / Overnight: 

• U.S. December NFP: A soft report, with the economy adding +50K jobs (vs. +60K exp) and the unemployment rate falling to 4.4%. 

Today’s Economic Calendar: 

• Japanese Markets Closed for Holiday. European Session: An extremely light calendar with only low-tier data releases. 
• U.S. Session: The U.S. data calendar is empty. 
• A heavy slate of Fed and ECB speakers, though their comments may be overshadowed by the political drama.

Key Events This Week: 

• U.S. December CPI (Tuesday) 
• Fed Speakers: A packed schedule of Fed officials (Bostic, Barkin) will be speaking. 

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The big story in commodities is the powerful surge in Gold and Silver. Gold and silver are the standout performers, with both metals surging to new all-time highs on a massive flight to safety. Spot gold jumped 2% to a record above $4,600 an ounce, while silver soared an incredible 3.5% to above $83.00. Crude oil prices are holding firm, supported by the escalating protests in Iran which are stoking fears of a major supply disruption. 

Asset	Up/Down	Unit / % Change	Last
WTI Crude	0.04	0.07%	59.08
Gold	68.92	1.53%	4,579.53
Silver	3.967	4.96%	83.917
EUR/USD	0.005	0.43%	1.1685
USD/JPY	-0.22	-0.14%	157.87
Bitcoin	1,087	1.20%	91,662
10-Year Note Yield	0.015	0.36%	4.19%

The U.S. dollar is under heavy selling pressure as the Fed’s credibility crisis sends investors fleeing the greenback. 

• EUR/USD: The pair is rallying strongly, climbing towards 1.1685 as the dollar tumbles. The euro is a key beneficiary of the flight from the dollar. The pair is caught in a range defined by a cluster of large options expiries between 1.1650 and 1.1700.
• GBP/USD: The pound is also catching a strong bid, with the pair recovering from a three-week low to trade around 1.3435. 
• USD/JPY: The pair is being whipsawed by competing forces. While the dollar is weak, the yen is also under pressure from domestic political uncertainty, with reports that Prime Minister Takaichi may call a snap election. The pair is rallying back towards 158.00. The Yen is underperforming, weighed down by reports that PM Takaichi may call a snap election in February, adding another layer of political uncertainty. A large $1.3B options expiry at the 158.00 level provides a key resistance target.

Cryptocurrencies: The crypto market is showing some resilience in the face of the broader risk-off mood. Bitcoin is trading modestly higher, around $92,000, but is largely lagging the explosive moves seen in precious metals. U.S. Treasury yields are climbing as investors demand a higher risk premium for holding U.S. debt amidst the institutional crisis unfolding at the Federal Reserve. The benchmark 10-year yield is trading around 4.19%. 

Looking Ahead 

Today’s trading will be dominated by the market’s reaction to the fast-moving political developments in Washington. Any further escalations in the feud between the White House and the Fed could lead to another wave of selling in the dollar and a further surge in precious metals. The focus will then shift to Tuesday’s crucial U.S. CPI report. With the Fed’s independence now in question, the inflation data will be even more critical in shaping the market’s expectations for monetary policy in the year ahead. Traders should be prepared for a period of extreme volatility.

What to Watch Today

• The Trump-Fed War: This is the only story that matters. The unprecedented public feud and the threat of a criminal indictment against the Fed Chair have created a major institutional crisis. Any new headlines or developments will be the primary driver of volatility. 
• The Data Deluge Resumes: This is the theme of the week. The market is finally getting a flood of delayed U.S. data, including CPI (Tuesday), New Home Sales (Tuesday), and PPI (Wednesday). These reports will be critical in shaping the Fed’s path. 
• Geopolitical Hotspots: The situation in Iran is a major wildcard. Any escalation in the protests or a U.S. intervention could send oil prices soaring. The prospect of a snap election in Japan is also a new and significant risk factor for the Yen. 
• Gold and Silver’s Parabolic Run: The flight to hard assets is in full swing. With both gold and silver hitting new all-time highs, the momentum is incredibly strong, but the risk of a sharp, violent pullback on any positive news is also very high.