Trump's Move to Oust Fed Governor Sparks Crisis

Kevin Morgan

Political

Central Bank

Economic

Summary:

Trump's unprecedented push to oust Federal Reserve leaders, including a Supreme Court battle over Governor Cook, threatens the central bank's independence and market stability.

Donald Trump is moving to replace Federal Reserve Chair Jerome Powell and other key officials, escalating a conflict over U.S. interest rate policy. This push challenges the central bank's long-standing independence and raises serious questions about future monetary policy and economic stability.

The core of the dispute centers on the Federal Reserve's control over interest rates. As of January 2026, tensions in Washington are high, with financial markets watching closely for potential policy shifts that could follow any change in the Fed's leadership.

The Legal Battle Over Governor Lisa Cook

The conflict has intensified with a direct attempt by Trump to terminate Federal Reserve Governor Lisa Cook. Cook is vocally disputing allegations of fraud leveled against her, a situation detailed in the legal appendix for Trump v. Cook.

The case has reached the Supreme Court, introducing further uncertainty into the outcome. Cook's attorney, Paul Clement, has stressed the severity of the situation, warning of "enormous irreparable harms from allowing Trump to fire Cook now because of the unique role of the Fed in determining monetary policy."

Market Stability at Risk as Powell Pushes Back

Alongside the pressure on Governor Cook, Fed Chair Jerome Powell is also facing the threat of a criminal investigation. This adds another layer of political pressure on the central bank's leadership.

Powell has framed the issue as a fundamental threat to the Fed's ability to serve the public interest free from political interference. "This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings," Powell stated. "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President."

This unprecedented upheaval has financial sectors on edge, with stakeholders concerned about policy stability and the potential for significant market volatility as they await the Supreme Court's decision.

A New Precedent for Fed Leadership Conflicts

While Trump has previously criticized Powell, his current actions mark a distinct escalation. Past disagreements did not carry the same intensity, making this a pivotal moment for the Federal Reserve.

Experts warn that these events could set a new precedent, potentially disrupting established norms that have historically shielded the central bank from political influence. The outcome of this debate could reshape the future dynamics of the Fed, profoundly influencing its leadership and the execution of U.S. monetary policy for years to come.

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Gerik

Economic

Fifth Year Of Deficit Marks A Turning Point In Scale

Japan posted a trade deficit for the fifth straight year in 2025, according to preliminary data from the Japan Ministry of Finance. The full-year deficit totaled 2.65 trillion yen, or roughly $17 billion, representing a significant improvement of nearly 53 percent compared with the previous year. This contraction reflects a combination of moderate export growth and broadly stable import levels, rather than a sharp demand-driven correction.

Exports rose 3.1 percent over the year, while imports increased by less than 1 percent, indicating that the narrowing deficit was primarily driven by external demand recovery rather than domestic consumption weakness. This pattern suggests correlation with global trade conditions and currency dynamics, rather than a fundamental restructuring of Japan’s trade balance.

December Data Shows Mixed Momentum

On a monthly basis, Japan recorded a trade surplus of 105.7 billion yen, or about $669 million, in December. While positive, this surplus was 12 percent smaller than in the same month a year earlier. Imports grew 5.3 percent year on year in December, slightly outpacing export growth of 5.1 percent, signaling renewed cost pressures from overseas sourcing.

By destination, exports to the United States fell 11 percent in December, while shipments to Britain, Africa, and parts of Asia including Hong Kong and India increased. Import flows remained strong from Europe but declined from Brazil and the Middle East. This geographic divergence highlights a rebalancing of trade partners rather than a uniform slowdown.

Tariffs And Geopolitics Add External Headwinds

Trade data continue to be shaped by uncertainty surrounding U.S. tariff policy under Donald Trump. The United States has imposed a 15 percent tariff on most Japanese imports, lower than the 25 percent initially proposed but still higher than previous levels. While the reduction eased immediate pressure, the higher baseline tariff has weighed on export competitiveness, particularly in manufacturing sectors sensitive to price changes.

Another growing concern is the impact of China’s restrictions on rare earth exports, which pose risks to Japanese automakers and advanced manufacturers. These curbs were announced after Prime Minister Sanae Takaichi suggested that a Chinese move on Taiwan could trigger a Japanese military response. The resulting trade and security tensions illustrate how geopolitical developments can translate into supply chain vulnerability, even when headline trade figures appear to be improving.

Domestic Resilience Despite External Strain

Despite persistent deficits and rising geopolitical risks, Japan’s broader economy has remained relatively stable. Public dissatisfaction has grown over rising prices and stagnant wages, but equity markets continue to signal confidence. The Nikkei benchmark has repeatedly reached record highs, reflecting strong corporate earnings expectations and investor optimism about Japan’s medium-term growth prospects.

This divergence underscores a key analytical point. While trade balances reflect external competitiveness and cost pressures, they do not automatically dictate overall economic performance. Japan’s narrowing deficit shows improvement at the margin, yet the continued reliance on complex global supply chains and exposure to geopolitical shocks suggests that structural vulnerabilities remain unresolved rather than eliminated.

Japan’s fifth consecutive trade deficit highlights continuity rather than crisis, with the sharp reduction in its size pointing to gradual adjustment rather than abrupt change. Export growth and stable imports have eased pressure for now, but tariffs, rare earth supply risks, and regional political tensions will continue to shape trade outcomes in 2026. The challenge for policymakers lies in converting cyclical improvement into more durable trade resilience without relying solely on favorable external conditions.

Source: AP

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FastBull Featured

Daily News

[Quick Facts]

1. Trump: Framework for Greenland Agreement is reached, planned tariffs will not take effect.

2. Trump to increase domestic travel ahead of the midterm elections.

3. U.S. Supreme Court may reject Trump's bid to oust Fed Governor Cook.

4. Trump says the U.S. economy is growing exceptionally strong, and Q4 GDP is expected to rise 5.4%.

5. Strong employment data boosts the Australian dollar, AUD/USD hits a 15-month high.

6. Trump hopes for no further action against Iran.

[News Details]

Trump: Framework for Greenland Agreement is reached, planned tariffs will not take effect

On social media, President Donald Trump said, following a highly productive discussion with NATO Secretary General Mark Rutte, he reached an agreement with NATO on a framework concerning the future of Greenland and the broader Arctic region. If finalized, the agreement would be a major benefit to the United States and all NATO member states. Based on this understanding, he will not implement the tariffs originally scheduled to take effect on February 1st. Further discussions are underway regarding Greenland and "The Golden Dome" project, with more information to follow as negotiations progress. Vice President Vance, Secretary of State Rubio, envoy Witkoff, and other relevant officials will lead the talks, reporting directly to him.

Trump to increase domestic travel ahead of the midterm elections

To promote his economic agenda and counter negative public opinion among American voters, President Trump plans to increase domestic travel ahead of the November midterm elections. White House Chief of Staff Susie Wiles told reporters aboard Air Force One en route to the World Economic Forum in Davos, Switzerland, that Trump will travel weekly, with schedules intensifying as the midterms—key to congressional control—draw near.

U.S. Supreme Court may reject Trump's bid to oust Fed Governor Cook

Reports indicate that U.S. Supreme Court justices have signaled caution toward Trump's attempt to dismiss Federal Reserve Governor Lisa Cook based on unproven mortgage fraud allegations, warning such a move could undermine the Fed's independence and roil financial markets. During Wednesday's hearing in Washington, both conservative and liberal justices sharply questioned Acting Solicitor General D. John Sauer, who urged the court to allow Trump to temporarily suspend Cook during ongoing litigation. Even justices appointed by Trump expressed skepticism. Justice Brett Kavanaugh said the president's position would weaken or even destroy the Fed's independence.

Trump says the U.S. economy is growing exceptionally strong, and Q4 GDP is expected to rise 5.4%

Trump declared that the U.S. economy is experiencing an unprecedented recovery, highlighting several key indicators: projected Q4 2025 GDP growth of 5.4%, a 77% monthly decline in the trade deficit, and a record $18 trillion in new investment commitments, expected to soon reach $20 trillion. He also noted that core inflation fell over the past three months, the stock market hit 52-week highs, adding $9 trillion in wealth to retirement and savings accounts. He reiterated his call for Congress to cap credit card interest rates at 10% for one year.

He attributed these achievements to White House policies, including significant tax cuts, deregulation, and a focus on domestic energy production. The U.S. is vigorously developing nuclear power and has signed directives approving the construction of multiple reactors. Trump added that recent declines in U.S. stocks are minor compared to earlier gains and predicted markets will double in value.

Strong employment data boosts the Australian dollar, AUD/USD hits a 15-month high

According to data released on Thursday, Australia's seasonally adjusted employment rose by 65,200 in December, far exceeding the market forecast of 30,000. The unemployment rate fell to 4.1%, below the expected 4.4%. The robust labor market reinforced expectations of Australian economic resilience.

As a result, the AUD/USD exchange rate climbed as much as 0.46% to 0.6790, its highest level since October 7, 2024, extending its recent rebound.

Additionally, Trump's decision to abandon punitive tariffs on the EU helped ease global trade tensions, providing further support to risk-sensitive currencies like the Australian dollar.

Trump hopes no further action against Iran

On January 21st, local time, while attending the World Economic Forum annual meeting in Davos, Switzerland, President Trump said, "We hope there's not going to be further action" against Iran, though sanctions and additional tariffs related to Iran will continue.

Trump emphasized that Iran must not pursue nuclear weapons research and warned that if it restarts its nuclear program, the large-scale airstrikes on Iranian nuclear facilities carried out last June could happen again.

[Today's Focus]

UTC+8 20:30 ECB releases minutes of December monetary policy meeting

UTC+8 23:00 U.S. November PCE data

TBD EU leaders hold emergency summit in Brussels to discuss responses to Trump's tariff threats

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Owen Li

Central Bank

Remarks of Officials

Bond

Data Interpretation

Daily News

Economic

Forex

Australia’s job market delivered a stunning surprise in December, with unemployment falling to a seven-month low and job creation far exceeding all forecasts. The robust data has sent shockwaves through financial markets, with traders now pricing in a greater than 50% chance of an interest rate hike from the Reserve Bank of Australia (RBA) next month.

The market reaction was swift. The Australian dollar surged 0.4% to a 15-month high of $0.6791, while yields on three-year government bonds climbed to a 14-month peak of 4.227%.

Before the data release, investors saw only a 29% probability of a rate hike on February 3. That figure has now jumped to 53%, signaling a dramatic shift in expectations for the RBA's next move.

"We're now closer to an RBA rate rise," noted Russel Chesler, head of investments and capital markets at VanEck. "While it's good news that Australians are fully employed, this is another indicator of a robust economy and inflation levels that are still too high for the RBA."

Inside the Strong December Numbers

Data from the Australian Bureau of Statistics (ABS) painted a picture of a resilient labor market, defying predictions of a slowdown.

• Unemployment Rate: Dropped to 4.1% from 4.3% in November, well below the 4.4% rate analysts and the RBA itself had forecast for the December quarter.

• Job Growth: The economy added a massive 65,200 net new jobs, smashing market expectations for a 30,000 gain and reversing a revised 28,700 drop from the previous month.

• Full-Time Employment: Rebounded strongly with an increase of 54,800 positions.

• Participation: The participation rate edged up to 66.7%, and total hours worked grew by 0.4% to a record high of over 2 billion hours.

The ABS suggested the strength was partly driven by a festive season surge, with more young people between the ages of 15 and 24 entering the workforce. However, the data also showed that annual job growth has moderated, slowing to 1.1% in December from 3.5% at the start of the year.

Inflation Data Now the Deciding Factor

This unexpectedly strong employment report, combined with record-high house prices and healthy consumer spending, raises questions about whether current monetary policy is tight enough. Despite three rate cuts last year that brought the cash rate to 3.6%, the economy continues to show signs of significant momentum.

The focus now shifts entirely to the fourth-quarter inflation figures, due next Wednesday. This data release is widely seen as the final piece of the puzzle that will determine whether the RBA hikes rates in February.

"The magic number for trimmed mean inflation is 3.2%," said Harry Murphy Cruise, head of economic research for Oxford Economics Australia. He explained that a reading above this level would likely warrant a rate hike, while a figure at or below it should give the RBA board reason to hold steady.

This sentiment is echoed by some of the country's largest financial institutions. Both the Commonwealth Bank of Australia and the National Australia Bank have been calling for a February rate hike since late last year, arguing that the economy is running up against its limits.

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Winkelmann

Political

Economic

Several people were missing following a landslide near a campsite in New Zealand's North Island on Thursday, as heavy rains caused widespread damage, with homes being evacuated, thousands without power and roads closed.

Emergency services were responding to a landslide near a campsite in Mount Maunganui, a popular tourist spot in the Bay of Plenty region along the northern coast of New Zealand.

The campsite has been evacuated and emergency services are working to locate anybody who remains in the area, police said in a statement.

Local media reports said helicopters have also been deployed to support ongoing search and rescue efforts.

Prime Minister Christopher Luxon said on X that he was "actively monitoring situations across the country – including the major incident in Mt Maunganui", adding extreme weather continues to cause dangerous conditions across the North Island.

Emergency Management and Recovery Minister Mark Mitchell said on Radio NZ that the heavy rains hit almost the entire eastern seaboard of the North Island.

"The good news is everyone responded very quickly. There was time to get prepared, and that helps to mitigate and create a strong response," he said.

New Zealand Transport Authority reported a number of main road closures in Northland, Bay of Plenty and Waikato. Local authorities said some small communities remain cut off due to damage to the roads.

New Zealand forecaster MetService has lifted all weather warnings in the North Island as the tropical low moves east. Some warnings remain in place for the South Island, but they are expected to ease on Thursday, it added.

Source: Reuters

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Golden Gleam

Remarks of Officials

Commodity

Daily News

Political

Forex

Gold prices retreated during Asian trading on Thursday, pulling back from a record high set in the previous session. The decline in safe-haven demand followed comments from U.S. President Donald Trump, who stepped back from tariff threats linked to a dispute over Greenland.

Gold's Record Rally Hits a Wall

The precious metal saw a significant reversal after a strong performance.

• Spot gold dropped 0.7% to $4,799.55 per ounce. This came after it reached a record high of $4,888.1 per ounce in the prior session.

• U.S. gold futures for the March contract fell 0.8%, settling at $4,801.75 per ounce.

The rally earlier in the week was driven by investors seeking shelter from global uncertainty, pushing bullion close to the key psychological level of $5,000 per ounce. The initial surge was fueled by heightened geopolitical risk stemming from a transatlantic dispute over Greenland and threatened tariffs on European imports.

Trump's Davos Comments Shift Market Sentiment

The catalyst for the pullback came from President Trump’s remarks at the World Economic Forum in Davos. He announced that he would not impose the threatened tariffs and ruled out using force in the dispute over the Danish territory.

Trump signaled that a "framework" deal to resolve tensions with NATO allies was on the horizon. "It's a long-term deal. It's the ultimate long-term deal," he told reporters. "It puts everybody in a really good position, especially as it pertains to security and to minerals."

These comments swiftly reduced the market’s appetite for safe-haven assets like gold, causing prices to correct.

Dollar Strength Adds to Gold's Headwinds

A minor rebound in the U.S. dollar also contributed to gold's weakness. The US Dollar Index, which measures the greenback against a basket of other currencies, traded marginally higher after posting a 0.1% gain in the previous session. A stronger dollar typically puts pressure on gold prices, as it makes the dollar-denominated commodity more expensive for buyers using other currencies.

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Justin

Stocks

Commodity

A view of the Valero Houston Refinery in Houston, Texas, U.S., June 23, 2025. REUTERS/Joel Angel Juarez

Valero (VLO.N) bought a cargo of Venezuelan crude oil, two sources said on Wednesday, the first deal by a U.S. Gulf Coast refiner struck as part of Washington's deal with Caracas to buy up to 50 million barrels of the South American country's crude.

Valero bought the crude from trading house Vitol, one of the two sources said. The crude was traded for delivery to the U.S. Gulf Coast at a discount of about $8.50 to $9.50 to Brent crude , two sources said.

While Valero has been a buyer of Venezuelan crude through Venezuelan state oil company's partner, Chevron (CVX.N), the deal would mark the first purchase from trading houses that were only authorized this month to market crude from Venezuela.

Offers of Venezuelan flagship Merey heavy crude to U.S. refiners began last week at a discount of between $6 and $7.50 per barrel to Brent.

Before sanctions were imposed in 2019, several large U.S. Gulf Coast refineries bought and processed about 800,000 barrels per day of Venezuela's heavy oil, according to U.S. government data.