Markets Overview
- ASX SPI 200 futures up 0.5% to 8,941.00
- S&P 500 up 0.4% to 6,465.94
- Dow Average up 0.3% to 45,418.07
- Aussie up 0.2% to 0.6495 per US$
- US 10-year yield fell 1.5bps to 4.2595%
- Australia 3-year bond yield rose 1.4 bps to 3.40%
- Australia 10-year bond yield rose 3 bps to 4.31%
- Gold spot up 0.8% to $3,393.51
- Brent futures down 2.2% to $67.26/bbl
Economic Events
- 10:30: (AU) July Westpac Leading Index MoM, prior -0.03%
- 11:30: (AU) July CPI YoY, est. 2.3%, prior 1.9%
- 11:30: (AU) 2Q Construction Work Done, est. 1.0%, prior 0%
- 11:30: (AU) July CPI Trimmed Mean YoY, prior 2.1%
The dollar fell and longer-dated Treasury yields rose as President Donald Trump’s push to remove Federal Reserve Governor Lisa Cook fueled concern about central bank independence and inflation risks. Stocks eked out gains before Nvidia Corp.’s results.
While the moves were modest in listless summer trading, they underscored growing unease over political interference in monetary policy. That could give Trump another chance to name someone to the Fed board as he repeatedly pressures officials to cut rates.
The slide in 30-year Treasuries followed losses in longer-dated debt from France and the UK, extending a drop that’s been driven by concerns about inflation and ballooning budget deficits. A solid $69 billion sale of two-year notes added to gains in short-dated maturities. The gap between five and 30-year yields is the steepest since 2021.
While a dollar gauge dropped just 0.2%, the greenback retreated against most major currencies. The S&P 500 added 0.4%, with Nvidia pacing gains in tech megacaps. UnitedHealth Group Inc. slipped as an ongoing criminal probe was said to be broader than an inquiry into possible Medicare fraud.
Trump said he was prepared for a legal fight after he moved to oust Cook amid allegations she falsified mortgage documents. The Fed, weighing in for the first time this week, said it would abide by any court decision in Cook’s legal challenge of her dismissal by Trump.
“Trump’s push to fire Cook has exacerbated concerns about the Fed’s independence,” said Ian Lyngen at BMO Capital Markets. “While the price action in US rates has been largely contained to the recent range, many of the go-to hedges against an erosion of Fed independence outperformed on the news of Cook’s firing.”
Even as political headlines flare, investors remain anchored to a bullish market script: a likely September rate cut, resilient economic growth, and corporate earnings strong enough to keep equity sentiment afloat.
“An independent Fed remains the dominant framework,” said Dennis DeBusschere at 22V Research. “There is no reason to go against that yet, but hedges are important.”
“This issue likely to get kicked to the courts for resolution,” said Brad Bechtel at Jefferies. “If it does go through, then clearly Trump has another seat to fill and that should then tip the board in his favor from a political alignment perspective.”
The Fed’s perceived independence from government whims is a bedrock assumption of US markets, and any change to that perception could weigh on US credit ratings.
S&P Global Ratings has recently warned that the nation’s credit rating could “come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Federal Reserve.”
The Trump administration is reviewing options for exerting more influence over the Fed’s 12 regional banks that would potentially extend its reach beyond personnel appointments in Washington, according to people familiar with the matter.
Trump’s move to oust Cook, if it holds up in court, would give him an opportunity to a secure a majority on the seven-person Board of Governors. But the central bank’s Federal Open Market Committee also includes five regional bank presidents who — unlike the governors — aren’t nominated by the White House or confirmed by the Senate.
“We will continue to monitor rising political pressure on the Fed, but expect its decision-making to remain guided by its mandate in the near term,” said Ulrike Hoffmann-Burchardi at UBS Global Wealth Management.
