Closing Recap 

U.S. stocks shrugged off a major political storm in Washington on Monday, with the S&P 500 and Dow Jones Industrial Average both surging to new all-time closing highs. The rally was broad-based but saw a defensive tilt, with Consumer Staples leading the gains while Financials lagged. The market’s remarkable resilience came despite a stunning weekend revelation from Fed Chair Jerome Powell that the Department of Justice has served the central bank with grand jury subpoenas, a move he described as politically motivated. 

The news initially sent futures tumbling and the U.S. dollar sharply lower, but equity investors quickly looked past the institutional turmoil. Precious metals were the main beneficiaries of the flight from the dollar and the heightened uncertainty, with gold and silver both surging to new record highs. 

Key Takeaways 

• S&P 500 and Dow Hit New All-Time Highs: U.S. stocks rallied to new records, showing incredible resilience as investors shrugged off a major political scandal involving the Federal Reserve. 
• Powell vs. Trump Explodes: Fed Chair Powell revealed a DOJ criminal probe, igniting fears about the Fed’s independence from the Trump administration and sending the U.S. dollar tumbling. 
• Gold and Silver Surge to New Record Highs: Precious metals were the main beneficiaries of the flight to safety and a weaker dollar. Gold soared 2.5% to settle at a record $4,614, and silver jumped 7.3%, and Silver has also hit a new record, smashing through the $86.00 level, driven by dovish Fed bets and intense safe-haven demand.
• Market Breadth Improves, Signaling a Healthier Rally: Key indicators of market breadth have improved significantly, with 70% of S&P 500 stocks now trading above their 50-day moving average, a bullish sign. 
• Yen Plunges to 1-Year Low as Snap Election Looms: The Japanese Yen has been hammered, with USD/JPY surging to a new one-year high near 159.00, as reports emerge that PM Takaichi plans to call a snap election, adding another layer of political uncertainty.
• Bitcoin Slips as Macro Risks Weigh: Bitcoin is struggling to find a bid, falling back towards $91,500 as geopolitical uncertainty and the prospect of a hawkish Bank of Japan weigh on the crypto market.
• Corporate “Whales” Continue to Buy Bitcoin: Despite the weak price action, on-chain data shows corporate “whales” like Strategy Inc. continue to accumulate, with the firm adding another 13,627 BTC to its holdings. 
• Oil Surges on Iran Protest Fears: WTI Crude Oil has rallied to a seven-week high as widespread anti-government protests in Iran spark fears of a major supply disruption. 
• Nikkei Hits Record High on Weak Yen: In a classic inverse correlation, Japan’s Nikkei 225 has surged to a new all-time high, benefiting from the Yen’s sharp depreciation.
• Trump Threatens New Tariffs on Iran-Linked Trade: President Trump announced a sweeping new 25% tariff on any country doing business with Iran, adding a fresh layer of uncertainty to global trade. 
• Supreme Court Tariff Ruling Looms: A major new risk has emerged, with President Trump warning of a potential “massive financial fallout” if the Supreme Court rules against his global tariffs, a decision that could come as early as this week.
• All Eyes on U.S. CPI: With the Fed’s credibility under fire, today’s key U.S. December CPI report has taken on even greater importance. 

Market Overview

Monday’s session was a testament to the market’s powerful bullish momentum and its ability to look past even the most shocking headlines. The extraordinary news of a DOJ criminal probe into the Federal Reserve, a direct challenge to the central bank’s independence, would typically be a major risk-off catalyst. Indeed, the initial reaction in the futures and currency markets was sharp and negative. However, by the time the U.S. equity market opened, investors had completely flipped the script, choosing instead to focus on the potential for a more dovish Fed and the continued strength of the U.S. economy. The resulting rally was broad and impressive, taking both the S&P 500 and the Dow to new all-time highs. The price action suggests that the “Powell Put” is still very much alive, with the market interpreting the political pressure on the Fed as a sign that the central bank will be forced to remain accommodative. 

Index	Up/Down	%	Last
DJ Industrials	86.13	0.17%	49,590
S&P 500	11	0.16%	6,977
Nasdaq	62.56	0.26%	23,733
Russell 2000	11.54	0.44%	2,635

This narrative, combined with improving market breadth, is providing a powerful tailwind for stocks. However, the flight to safety was still very evident in the commodity markets, where gold and silver exploded to new records. This bifurcation highlights the deep-seated uncertainty in the market. While equity investors are cheering the prospect of lower rates, others are hedging against the significant institutional and geopolitical risks that are now front and center.

Economic Calendar 

Today’s focus is on the crucial U.S. CPI report. Data Released Yesterday / Overnight: 

• New Zealand Business Confidence: Jumped to its highest level since 2014, a strong positive signal for the Kiwi economy. 

Today’s Economic Calendar: 

• European Session: An extremely light calendar with only a few central bank speakers scheduled. 
• U.S. Session: The main event is the U.S. December CPI report. The headline rate is expected to hold steady at 2.7% y/y, with the core rate forecast to tick up to 2.7%. 
• 13:30 GMT – U.S. December CPI (Headline YoY exp: 2.7%, Core YoY exp: 2.7%). 
• 13:30 GMT – U.S. ADP Weekly Jobs Data. 
• A heavy slate of Fed and BoE speakers, including Governor Bailey.

Asset Class Spotlight: FX, Commodities, Bonds & Crypto

The big story in commodities is the continued strength in Gold. Gold and silver were the standout performers, with both metals surging to new all-time highs on a massive flight to safety. February gold soared 2.5% to settle at a record $4,614.70 an ounce, while silver futures jumped an incredible 7.3% to $86.34. Crude oil prices also rallied, with WTI settling at a seven-week high as rising tensions in Iran stoked fears of a major supply disruption.

Asset	Up/Down	Unit / % Change	Last
WTI Crude	0.38	0.64%	59.5
Gold	113.8	2.55%	4,614.70
EUR/USD	0.003	0.26%	1.1667
USD/JPY	0.21	0.13%	158.09
Bitcoin	-150	-0.20%	91,894
10-Year Note Yield	0	0.00%	4.17%

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

• USD/JPY: The yen plunged to a one-year low, with the pair surging towards 159.00. The market is completely ignoring Japan’s verbal intervention threats, focusing instead on the currency’s yield disadvantage as Japanese equities soar to record highs. The Yen is in freefall, weighed down by the prospect of a snap election and a massive new stimulus package from PM Takaichi, with verbal intervention from officials proving completely ineffective so far.
• EUR/USD: The pair is rallying strongly, climbing towards 1.1670 as the dollar tumbles. The euro is a key beneficiary of the flight from the dollar, having snapped an eight-day losing streak on Monday. The pair is being pressured by the broad strength of the U.S. dollar and a cautious European Central Bank. A notable $822M options expiry at the 1.1700 level provides a key resistance point.
• GBP/USD: The pound is also catching a strong bid, with the pair rallying towards 1.3470 as the dollar’s weakness provides a powerful tailwind. 
• AUD/USD: The Aussie is a notable outperformer, with Societe Generale calling it the “most constructive long position” in G10, even amidst broader geopolitical uncertainty. A large $1.0B options expiry at the 0.6700 level is a key level to watch.

Cryptocurrencies: The crypto market is showing some signs of stabilizing but remains under pressure. Bitcoin is trading quietly around the $92,000 level, lagging the strong gains in equities as a lack of fresh catalysts and a focus on AI stocks pull capital away from the sector. However, corporate accumulation continues, with Strategy Inc. adding another 13,627 BTC to its treasury. U.S. Treasury yields were slightly higher after a strong 10-year note auction saw good demand. The benchmark 10-year yield held steady around 4.17%, reflecting the ongoing uncertainty. 

Looking Ahead 

Today’s trading will be dominated by the release of the U.S. December 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. A softer-than-expected print would reinforce the case for rate cuts and could fuel another leg higher in the risk-on rally. However, a hot number could amplify the market’s recent jitters and lead to a sharp reversal. Traders should also be on high alert for any further developments in the ongoing political saga between the White House and the Federal Reserve.

What to Watch Today: 

• The CPI Litmus Test: This is the only game in town. The market is positioned for a soft number that will validate the dovish Fed narrative. A hot inflation print would be a major bearish surprise and could trigger a significant hawkish repricing, boosting the dollar and pressuring stocks and gold. 
• The Yen’s Freefall and Intervention Risk: The Yen’s slide is becoming disorderly. With USD/JPY now at a one-year high, the risk of physical FX intervention from Japanese authorities is significantly elevated, making this a very dangerous pair to trade. 
• The AI Boom vs. Bubble Debate: This will be a central theme for 2026. With major banks like BofA warning of “bubble-like behavior” and prominent investors like Michael Burry sounding the alarm, the market will be hyper-sensitive to any signs of weakness in the tech sector. 
• The Fed Leadership Question: President Trump’s impending decision on the next Fed Chair is a major source of uncertainty. The market is on edge, as the choice will have significant implications for the path of monetary policy in 2026 and beyond.
• The Geopolitical Chessboard: The market is now juggling multiple geopolitical risks: the Trump-Fed feud, the threat of new tariffs on Iran-linked trade, a potential Supreme Court ruling on existing tariffs, and the prospect of a snap election in Japan. Any one of these could suddenly become the dominant market driver.
• The Precious Metals Parabola: The moves in Gold and Silver are historic but are also becoming extremely extended. While the underlying fundamentals are strong, the risk of a sharp, violent pullback on profit-taking is very high.