Chris Beauchamp, Chief Market Analyst at IG: "The spat between Trump and Powell had been quiet of late, at least publicly, but the infighting has stepped up a gear following the DoJ's investigation of the Fed. Gold has surged to a new high on the news, while US futures are weaker. This certainly wasn't on our bingo card for 2026, but it represents a major crisis for markets and has the potential to restart worries about the dollar and US monetary policy. Earnings season might knock this story off the front page for a while, but it will now rumble along in the background."
Susannah Streeter, Chief Investment Strategist, Wealth Club: “Gold is glittering as a safe haven, racing to fresh record highs as geopolitical tensions and unpredictable White House policy set investors on edge. Gold jumped another 1.7% heading above $4,586 as President Trump threatened action against Iran, after fatalities mounted in a crackdown on protestors which have erupted across the country. Given the Trump’s bolshy interventionist attitude demonstrated in the attack on Venezuela, fresh strikes on another nation state can’t be ruled out, particularly given the US has previous with Iran, hitting nuclear sites back in June. Iran has voted retaliation, on US assets and Israel and there are concerns that it could re-ignite the Middle East tinder box.
It's little surprise given the importance of the region as an oil producing hub, that oil prices Crude jumped higher, in the two-day rally since October as the US warned Iran about imminent action. Iran exports around 2 million barrels a day and disruption wreaked by a military operation has the potential to tighten global supplies. Brent crude has stabilised and is hovering around $63 a barrel, but prices are likely to remain volatile. Although this could a little more wind in the sails of listed energy giants, it’ll be offset by increasing investor caution.
Equity trading is set for a subdued start to the week as the world watches to assess another round of unpredictable policy from the White House. Wall Street has been rattled by what’s being viewed as another assault on the independence of the US Federal Reserve. In a shock video statement, chair Jerome Powell revealed that the Department of Justice had issued the central bank grand jury subpoenas threatening criminal indictment. The action was related to Powell’s testimony to congress in the summer regarding renovations of Fed HQ. Powell claims the action is a ‘pretext’ for rising pressure on the Federal Open Market Committee to cut interest rates. It certainly marks a sharp escalation in the Trump administration’s criticism of the Fed and is unnerving investors given that an independent central bank is considered to be crucial to maintaining sound monetary policy, especially at a time when the mounting US debt pile is coming under scrutiny. The dollar index shifted lower, an indication of a fresh caution among investors about how US economic policy is playing out.
The FTSE 100 has taken a pause in its record run higher but is still hovering well above the psychologically important 10,000 mark. Domestically focused stocks look set to come under more pressure after the latest jobs snapshot indicated employers were even more reticent to take on staff in December. Even as the dust settled after the Autumn Budget it didn’t appear to give firms much more confidence. The closely watched monthly survey from the Recruitment and Employment Confederation and KPMG and published on Monday, showing that hiring activity fell for the 39th consecutive month. While this could be interpreted as further evidence of a weakening economy, and could bolster the case for further interest rate cuts, wage growth among permanent hires rose more quickly. This may continue to make policymakers at the Bank of England wary about moving too quickly, given potential inflationary pressures. Big retailers and consumer focused firms have already warned about caution among shoppers and with unemployment rising, those concerns will continue to swirl.”
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