US Fed subpoenas revive ‘sell America’ trade on autonomy concerns

The action is the latest in a series of confrontations against the central bank, from efforts to fire Governor Lisa Cook to repeated calls for aggressive interest rate cuts

• US markets slid as Trump escalated attacks on Fed, raising autonomy concerns
• Dollar weakened, S&P 500 futures fell, and Treasury yields rose amid uncertainty
• Investors eye non-US assets as Fed independence faces renewed scrutiny

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‘Sell America’ sentiment swept through markets on Monday after the Trump administration escalated its attacks on the Federal Reserve, fueling concerns over the central bank’s autonomy in setting interest rates.

The dollar, Treasuries and US equities futures all slid in early Asia trading after Chair Jerome Powell said the threat of a US criminal indictment — related to his congressional testimony on renovations at the Fed’s headquarters — was a consequence of a disagreement over monetary policy. The action is the latest in a series of confrontations against the central bank, from efforts to fire Governor Lisa Cook to repeated calls for aggressive interest rate cuts.

The selloff revives debate over just how far the US president can and should influence the nation’s rate stance, which in recent decades have been insulated from political interference so as to ensure price stability. It’s also reviving questions on whether investors should reduce exposure to US assets and the dollar — a theme that dominated global markets last April when President Donald Trump announced universal tariffs.

“Any development that raises questions about the Fed’s independence adds uncertainty around US monetary policy,” said Gary Tan, portfolio manager at Allspring Global Investments, which oversees more than $600 billion. “This is likely to reinforce existing trends of diversification away from the dollar and increase interest in traditional hedges such as gold.”

Bloomberg’s dollar gauge fell as much as 0.2% in Asia trading, with the greenback weakening against almost every Group-of-10 currency. S&P 500 futures slid 0.5% as of 3 a.m. Monday in New York, while contracts on the Nasdaq 100 declined 0.8%.

Benchmark 10-year US Treasury yields advanced two basis points in early London trading, while those on 30-year securities rose four basis points.

For investors, the escalation sets the stage for heightened market volatility given the potential impact for long-term monetary policy. JPMorgan Asset Management expects the news to steepen the Treasury yield curve on expectations of more aggressive rate cuts. Lombard Odier sees the dollar and Treasuries coming under more pressure. Invesco Asset Management says non-US assets like European and Asian equities look more favorable.

It casts a spotlight on the dollar, which underpins world trade and makes up nearly 90% of foreign exchange transactions. European Central Bank Governing Council member Francois Villeroy de Galhau warned last week that the administration’s criticism of the Fed is threatening the greenback’s role.

The dispute stems from Trump’s long-running feud with Powell. The president has pressed the Fed to cut rates quicker to boost the economy and ease government borrowing costs, whereas Fed governors who set rates have been wary of rising inflation. Paul Volcker, who became Fed chair in 1979, is remembered for waging a dogged fight to quell an inflation problem that many believe went unchecked because the Fed gave in to pressure from then President Richard Nixon.

“The news could once again propagate the ‘Sell America’ narrative as we approach the opening bell,” said Gerald Gan, chief investment officer at Singapore-based Reed Capital Partners. The dynamics reflect an administration “focused on regaining public approval ahead of the midterm elections, even at the expense of institutional credibility.”

Less Attractive

US assets came under strain last year when Trump’s sudden global tariff announcement sent markets into a tailspin. Treasury yields had spiked when the levies were announced in April, with 30-year yields soaring more than 80 basis points on an intraday basis between the so-called Liberation Day to late May. The dollar tumbled more than 8% in 2025, its steepest annual decline since 2017.

“The Fed subpoena is another example of how US assets are becoming less attractive,” said David Chao, global market strategist at Invesco Asset Management, which oversees more than $2 trillion in assets. “Not only is the US retrenching behind its Fortress America borders, the country is also becoming more predatory.”

In an interview with NBC News on Sunday, Trump denied having any knowledge of the Department of Justice’s investigation into the central bank.

Some are taking a more cautious view, saying that given the strong positioning of the dollar as a reserve currency, the deep liquidity in Treasuries and the artificial intelligence boom powering stocks, any pullback could be an opportunity to buy. “While we are always concerned with independence, it is something we will watch and make decisions when there is a more definable economic outcome,” said Marvin Loh, senior macro strategist at State Street in Boston.

Still, ‘Sell America’ pressures are unlikely to go away as trading gets underway for 2026.

Powell’s investigation looks “more like smoke than fire” right now, said Hebe Chen, senior market analyst at Vantage Global Prime Pty., but how long that lasts is up for debate. “Its longer-term and more deep-rooted implications are far more profound,” she added.