Powell Under Criminal Investigation Shakes Global Markets: Dollar Plunges, Gold Breaks $4,600
As the U.S. Justice Department launches a criminal probe into Federal Reserve Chair Jerome Powell, intensifying the already tense relationship between the Fed and the White House, global markets reacted swiftly in Asian hours Monday: the dollar index plunged sharply, U.S. stock futures fell across the board, and spot gold surged past the $4,600 level.
Market data showed the ICE Dollar Index, which measures the greenback against six major currencies, dropped 0.3% in Asian trading, briefly breaking below 99 to hit 98.89—snapping four straight days of gains.
“Powell is clearly tired of being a spectator and is going on the offensive,” said Ray Attrill, head of FX strategy at National Australia Bank in Sydney. “The open confrontation between the Fed and the U.S. government—if taken at face value—is bad news for the dollar.”
According to sources familiar with the matter, the U.S. Attorney’s Office for the District of Columbia has opened a criminal investigation into Powell regarding renovations at the Fed’s Washington headquarters, specifically whether he made false statements to Congress about the project’s scope.
In a rare Sunday video statement, Powell hit back hard, calling the probe “unprecedented” and questioning its motives while insisting he will not be intimidated by political pressure in performing his duties. Powell said the issue boils down to whether the Fed can continue setting rates based on evidence and economic conditions—or whether monetary policy will be subject to political threats or coercion.
In futures markets, U.S. stock contracts fell sharply early Monday. Dow Jones futures dropped more than 200 points, S&P 500 futures lost 0.5%, and Nasdaq 100 futures declined 0.7% as investors dumped risk assets amid the escalating standoff between Trump and the Fed.
Freedom Capital Markets chief market strategist Jay Woods said: “The market has been through similar situations before and hated them. The current issue goes beyond Powell personally—it’s about Fed independence. So when news like this breaks, the instinctive reaction is to sell.”
The Chicago Board Options Exchange Volatility Index (VIX), Wall Street’s “fear gauge,” rose in early trading, reflecting traders adding protective options positions as Powell’s investigation news spread.
Meanwhile, safe-haven assets rallied: spot gold jumped as much as 2% intraday, briefly breaking above $4,600, while the Swiss franc gained 0.5%.
“This investigation is bad news for the Fed, the U.S. government, and the broader U.S. market,” said Nick Twidale, chief market analyst at AT Global Markets. “Powell’s statement was very strong—he looks ready to confront the president head-on.”
The debate over Fed independence comes as U.S. stocks hit fresh record highs last week. The S&P 500 and Dow Jones both closed at all-time highs on Friday, capping strong gains in the first full trading week of the new year. The S&P 500 rose over 1% for the week, while the Dow and Nasdaq Composite jumped 2.3% and 1.9%, respectively.
Traders are also gearing up for the start of the Q4 earnings season in the coming weeks, with major Wall Street banks set to report soon. JPMorgan Chase, Bank of America, Morgan Stanley, and Goldman Sachs are among those scheduled, offering fresh insights into consumer spending, M&A activity, and trading revenue health.
Additionally, Tuesday’s latest U.S. inflation data is in focus—the final major inflation read before the Fed’s late-January meeting. It will help shape views on the timing and scale of future rate cuts.
Last Friday’s December nonfarm payrolls showed a cooling labor market but enough resilience to support economic stability. The Supreme Court could rule as early as Wednesday on the legality of most Trump tariffs.
Trump: I know nothing about Powell probe
President Trump, in an interview late January 11 local time, denied any involvement with the Justice Department’s subpoena to the Fed. “I know nothing about it,” he said.
Fed Chair Powell earlier released a video statement confirming the Trump administration threatened criminal charges against him over his June 2025 congressional testimony, and the Justice Department issued a subpoena to the Fed on January 9 local time. Powell called it a “pretext” to pressure him further on rate cuts.