Trump's confrontation with Fed Chair Powell is driving market turbulence, causing outflows from US assets. Economic data releases this week will gauge tariff impacts while gold reaches record highs as investors seek safety amid ongoing US-China trade tensions.

Key Events and Data to Watch This Week

Monday, April 21

• China: PBoC Interest Rate Decision

Tuesday, April 22

• Eurozone: Consumer Confidence (Apr) Prel

• Australia: Judo Bank Composite PMI (Apr) Prel

Wednesday, April 23

• Germany: HCOB Composite PMI (Apr) Prel

• Eurozone: HCOB Composite PMI (Apr) Prel

• UK: S&P Global/CIPS Composite PMI (Apr) Prel

• U.S.: S&P Global Composite PMI (Apr) Prel

• U.S.: New Home Sales Change (Mar)

• U.S.: Fed's Beige Book

Thursday, April 24

• Germany: IFO -- Business Climate (Apr)

• Germany: IFO -- Expectations (Apr)

• U.S.: Durable Goods Orders (Mar)

• U.S.: Existing Home Sales Change (Mar)

• UK: GfK Consumer Confidence (Apr)

• Japan: Tokyo Consumer Price Index (Apr)

Friday, April 25

• UK: Retail Sales (Mar)

• Canada: Retail Sales (Feb)

• U.S.: Michigan Consumer Sentiment Index (Apr)

• U.S.: UoM 1-year Consumer Inflation Expectations (Apr)

• U.S.: UoM 5-year Consumer Inflation Expectation (Apr)

Fed Independence in Question as Trump Targets Powell

Last week, no new retaliatory measures emerged in the U.S.-China trade dispute, and markets shifted their focus to potential negotiations between the U.S. and its trade partners-although no tangible progress has been made. Meanwhile, growing speculation that President Donald Trump might attempt to remove Federal Reserve Chair Jerome Powell triggered intensified outflows from U.S. assets.

Trump renewed his criticism of Powell last week, openly blaming him for not cutting rates. He took it a step further by stating that he could remove the Fed Chair if he wanted to. Although this wasn't Trump's first comment on monetary policy or Powell's position, remarks by his chief economic advisor, Kevin Hassett, on Friday added a new layer to market turbulence.

Hassett told reporters that the president and his team will continue to study whether Powell could be dismissed. He also accused the Fed, under Powell's leadership, of pursuing a political agenda to benefit the Democrats.

Legally, a president has no authority to remove the Fed Chair. However, it appears the administration is seeking a potential path forward. Section 10 of the Federal Reserve Act allows the President to remove a Board member "for cause," which legal scholars generally interpret as serious misconduct or abuse of power. In this context, the administration may be attempting to frame Powell's actions as politically motivated to meet that threshold.

Trump's Policy Volatility Fuels Flight from U.S. Markets

Trump's erratic trade strategy and aggressive tariff measures had already undermined confidence in the exceptionalism of the U.S. economy, triggering capital outflows. Now, the prospect of Powell's removal has dealt another blow to U.S. assets: the dollar fell to a three-year low against major peers, Treasury outflows accelerated, the yield curve steepened, and equities extended their declines-with the S&P 500 down 2.3% and the Nasdaq 2.9% on the week.

Economists warn that if doubts about the Fed's credibility grow amid ongoing tariff concerns, U.S. markets could fall further. Institutions like Bank of America, Citigroup, and BlackRock have all lowered their U.S. equity forecasts, warning of persistent cracks in U.S. asset resilience.

Some analysts argue that even if Trump cannot remove the Fed Chair, ongoing trade policy uncertainty alone could drive continued divestment from U.S. assets. As Trump's unpredictability continues to destabilize the economic outlook, the dollar's international standing could weaken further.

Speculation on Rate Cuts Grows Amid Trump-Fed Friction

Another factor weighing on the dollar is speculation that removing Powell would clear the way for more aggressive rate cuts. Swaps markets are now fully pricing in three quarter-point cuts this year, with a 60% probability assigned to a fourth. The first cut is expected as soon as June, with a 70% probability.

Going forward, the Fed may be forced to choose between countering the drag from tariffs by easing policy or standing firm to contain inflation. While markets are betting the Fed will move to support growth, recent remarks from Powell and other officials continue to emphasize tariff-driven inflation risks and the need for a wait-and-see approach.

With the 90-day pause on reciprocal tariffs ongoing and negotiations still uncertain-especially in the context of continued tensions with China-it may take more time to fully assess the impact of recent trade measures.

Inflation remained stubbornly above the Fed's 2% target in the first quarter. Even if the inflationary effects of tariffs prove temporary, Fed officials are determined to keep long-term expectations anchored, and premature easing could risk de-anchoring those expectations.

In this context, as Duhani Capital Research team, we assess it is unlikely the Fed will act as early as June. Policymakers are more likely to wait until early Q4 and, depending on the impact of tariffs, may deliver one or at most two rate cuts this year.

Data, Diplomacy, and Defensiveness: A Pivotal Week for Markets

This week, markets will turn to key activity data from the U.S., Europe, and Asia to gauge the early impact of tariffs. The Fed's Beige Book will provide further insights into regional conditions, while consumer sentiment data from the University of Michigan will offer a snapshot of expectations.

Markets will also remain focused on developments in trade negotiations. South Korean trade officials are expected to visit Washington for talks, while Japan-having already held initial discussions with the U.S. last week-is reportedly reviewing its domestic auto safety standards in favor of U.S. exporters.

Meanwhile, China warned other countries against entering deals with the U.S. that might harm Beijing's interests. The warning came following reports that the U.S. had asked partners to restrict trade with China during bilateral negotiations. China signaled that it would respond firmly to any such move and remain committed to resisting U.S. pressure.

As tensions between the world's two largest economies continue, global risk aversion is likely to persist, keeping markets in a defensive mode.

Gold Takes the Lead as U.S. Confidence Cracks

As markets continued to weigh the potential global economic fallout from tariffs and the risk of Fed Chair Powell's removal, safe-haven flows persisted, pushing gold above $3,395 per ounce to a new record high.

As Trump's unpredictable policies continued to weigh on global risk appetite, rate cut bets on the Fed increased, and the U.S. dollar weakened, gold has steadily strengthened its safe-haven status since the beginning of the year. With investors around the world seeking greater safety, flows into gold have surged. Gold-backed exchange-traded funds (ETFs) have seen inflows for 12 consecutive weeks-the longest stretch since 2022-while central banks have continued to build up their gold reserves.

In addition, Trump's comments on Powell's position intensified doubts over U.S. asset reliability, boosting demand for havens. Gold jumped more than 5.7% last week alone and has now gained over 29% year-to-date.

Looking ahead, further losses in U.S. assets appear likely, and with global risk aversion expected to persist, inflows into gold are likely to remain elevated. Several Wall Street banks have recently raised their gold forecasts, with projections now pointing to $4,000 per ounce by mid-2026.