Political risks are mounting! The controversy over the Federal Reserve subpoena triggers a trust crisis, sparking a new wave of "selling America".

The Trump administration escalated its attacks on the Federal Reserve over the weekend, sparking deep concerns about the central bank's independence and causing a "sell-off in the US" sentiment to sweep through the markets on Monday. After Federal Reserve Chairman Jerome Powell stated that the US criminal investigation is a consequence of monetary policy disagreements, the US dollar, US bonds, and US stock futures all fell in early Asian trading. From attempting to fire board member Lisa Cook to repeatedly calling for aggressive interest rate cuts, Trump has launched a series of attacks on the Federal Reserve, with this latest action being the newest scene in these confrontations. This comprehensive sell-off has reignited the debate on to what extent the US president should be able to and should influence the country's interest rate stance, a field that has long been considered the exclusive domain of the Federal Reserve. This has also raised questions among investors about whether they should reduce their exposure to US assets and the US dollar a theme that dominated global markets last April when Trump announced comprehensive tariffs. "Any development that raises questions about the independence of the Federal Reserve increases the uncertainty of US monetary policy," said Gary Tan, a portfolio manager at Allspring Global Investments, which manages over $600 billion in assets. "This could strengthen existing trends toward US dollar diversification and increase interest in traditional hedging tools like gold." Powell stated that the grand jury subpoena related to his testimony in Congress about the ongoing renovation of the Federal Reserve headquarters in June should be seen in the context of broader government threats and pressure. For investors, given its potential impact on long-term monetary policy, the escalation of the situation sets the stage for increased market volatility. This puts the focus on the US dollar the cornerstone of world trade, accounting for nearly 90% of foreign exchange transactions. European Central Bank board member Francois Villeroy de Galhau warned last week that government criticism of the Federal Reserve is threatening the US dollar's status. Strategist Mark Cranfield believes, "Given the risk of Powell being hindered in performing his duties as Federal Reserve chairman, macro traders are likely to increase their short positions on the US dollar." As of the time of writing, the Bloomberg Dollar Index fell by as much as 0.38% in Asian trading, and the US dollar weakened against almost all G10 currencies. S&P 500 index futures fell by 0.51%, while Nasdaq 100 index futures dropped by 0.76%. US Treasury futures also fell. Gerald Gan, chief investment officer at Reed Capital Partners in Singapore, said that this event reflects a government willing to sacrifice institutional credibility in order to regain public support before the midterm elections. Decreased attractiveness Last year, Trump's sudden announcement of global tariffs caused chaos in the markets, putting pressure on US assets. When he announced tariffs in April last year, US Treasury yields surged, with the 30-year yield increasing by over 80 basis points during the period between the "liberation day" and the end of May. The US dollar plunged by over 8% in 2025, marking its largest annual decline since 2017. Strategists and investors warn that if tensions continue to escalate, sell-offs could intensify. JPMorgan Asset Management stated that this news could lead to a further steepening of the US bond yield curve. UBS believes that the US dollar and US bonds will face greater pressure. Schroders Asset Management is bullish on non-US assets such as European and Asian stocks. "The Federal Reserve subpoena incident once again shows that the attractiveness of US assets is decreasing," said David Chao, global market strategist at Schroders Asset Management, which manages over $2 trillion in assets. "The US is not only retreating behind its 'Fortress America' borders but is also becoming more predatory." Trump denied knowledge of a Justice Department investigation into the Federal Reserve in an interview on Sunday. Some are more cautious, believing that given the US dollar's strong position as a reserve currency, the deep liquidity of the US bond market, and the AI-driven bull market, any pullback could be a buying opportunity. "Although we remain vigilant about independence, we will continue to watch and make decisions when the economic impacts are clearer," said Marvin Loh, senior macro strategist at TD Bank in Boston. However, as trading in 2026 unfolds, the pressure to "sell off in the US" is unlikely to dissipate. Hebe Chen, senior market analyst at Vantage Global Prime Pty., said that the investigation into Powell currently appears to be a "storm in a teacup," but its duration is questionable. She added, "The long-term and more fundamental impact is likely to be much more profound."