Markets Overview

  • ASX SPI 200 futures up 0.6% to 8,588.00
  • Dow Average up 0.5% to 44,254.78
  • Aussie up 0.2% to 0.6527 per US$
  • US 10-year yield fell 2.6bps to 4.4553%
  • Australia 3-year bond yield rose 0.7 bps to 3.51%
  • Australia 10-year bond yield rose 2 bps to 4.40%
  • Gold spot up 0.7% to $3,347.57
  • Brent futures little changed at $68.70/bbl

Economic Events

  • 10:30: (AU) Australia to Sell A$1 Billion 112-Day Bills
  • 10:30: (AU) Australia to Sell A$1 Billion 70-Day Bills
  • 11:00: (AU) July Consumer Inflation Expectation, prior 5.0%
  • 11:30: (AU) June Employment Change, est. 20,000, prior -2,500
  • 11:30: (AU) June Unemployment Rate, est. 4.1%, prior 4.1%
  • 11:30: (AU) June Participation Rate, est. 67.0%, prior 67.0%
  • 11:30: (AU) June Part Time Employment Change, prior -41,100
  • 11:30: (AU) June Full Time Employment Change, prior 38,700

Speculation about the fate of Federal Reserve Chair Jerome Powell set off a short-lived tempest in financial markets Wednesday, with volatility mostly quelled after President Donald Trump said he has no plans to fire the central bank chief and was only discussing it in “concept.”

The S&P 500 bounced as Trump said he is “not planning on doing anything” to remove Powell, after a White House official said the president was likely to seek the Fed Chair’s ouster soon. Treasury two-year yields, which are more sensitive to imminent Fed moves, slid five basis points to 3.89%. The dollar halted a four-day advance. Softer-than-estimated inflation data also helped fuel the moves on Wednesday, reinforcing bets on Fed rate cuts in 2025.

Anyone hoping to discern from today’s market action how investors would treat Powell’s firing had a litany of moving parts to consider. While the initial reaction was relatively modest, traders may have simply cast the episode as the latest political theater.

Framed as rhetorical pressure rather than an imminent rupture in Fed leadership, the trading action may therefore provide a poor proxy for how Wall Street would react if Trump actually removed Powell — a prospect that strategists warn would rattle global markets.

“After the president’s subsequent backing off on remarks to remove Powell, the immediate crisis may have passed, though we doubt we are entirely done with this saga,” said Michael Feroli at JPMorgan Chase & Co.

Top bosses at some of Wall Street’s biggest banks emphasized the importance of an independent Fed.

Bank of America Corp.’s Chief Executive Officer Brian Moynihan and Goldman Sachs Group Inc.’s David Solomon joined JPMorgan’s CEO Jamie Dimon in stressing how critical the Fed’s autonomy is. Moynihan said in an interview with Bloomberg TV on Wednesday that the Fed was “set up to be independent.”

To Chris Zaccarelli at Northlight Asset Management, a decision to fire the Fed chief would negatively impact markets as concerns around central bank independence would be at “the forefront of investors’ minds.”

The president’s remarks in the Oval Office left open the possibility of ousting Powell for cause. Trump and his allies have lambasted the Fed chair over the central bank’s decision to hold rates steady and the cost of the central bank’s renovations of its Washington headquarters.

“The decision to fire Powell would have to make its way through the courts because he can only be fired for cause, and they have to determine if the cost overruns on the new Fed building are grounds for that,” he added.

To Dominic Pappalardo at Morningstar Wealth, the biggest outcome of the public criticism from Trump of Powell and ongoing threats of removing him is the possibility of erosion of the Fed’s credibility.

“Markets are unlikely to look kindly on attempts to forcibly remove Chair Powell from office and threaten Fed independence,” said TD Securities strategists including Oscar Munoz and Gennadiy Goldberg. They view such an action as a low-probability, but high-impact event.

“We would expect markets to price in higher long-run inflation, higher term premium, more near-term Fed rate cuts (and hence lower front-end rates), increased market volatility, and a steeper yield curve,” they added.

Trump has repeatedly assailed Powell as the Fed has held off on cutting rates amid concern that tariffs may spur inflation. Treasury Secretary Scott Bessent on Tuesday suggested Powell should step down from the central bank’s board when his term as chair is up in May 2026.

The Fed’s continued independence is “absolutely critical,” Dimon at JPMorgan said on a conference call Tuesday. That just doesn’t mean under Powell, whom Dimon said he respects, but also for whomever eventually succeeds him.

Meddling with the Fed “can often have adverse consequences,” Dimon noted.

A Trump’s dismissal of Powell would be an underpriced risk that could trigger a selloff in the dollar and Treasuries, Deutsche Bank AG’s George Saravelos recently said.

If Trump were to force Powell out, the subsequent 24 hours would probably see a drop of at least 3% to 4% in the trade-weighted dollar, as well as a 30 to 40 basis point fixed-income selloff, he said.

“Investors would likely interpret such an event as a direct affront to Fed independence, putting the central bank under extreme institutional duress,” Saravelos said.

Meantime, US economic activity “increased slightly” between late May and early July, the Fed said in its Beige Book survey of regional business contacts. The report also said that “uncertainty remained elevated, contributing to ongoing caution by businesses.”

Earlier Wednesday, data showed the producer price index was unchanged from a month earlier, after an upwardly revised 0.3% gain in May. US wholesale prices rose 2.3% from a year earlier, the least since September.

“Disinflation remains, but the Fed will be undeterred in keeping rates steady until September,” said Jamie Cox at Harris Financial Group. “As long as the labor market remains strong and resilient, rates aren’t likely to move meaningfully lower.”