Fed Chair Powell reveals Justice Department criminal threats raising concerns over central bank independence. Precious metals reach record highs. US dollar weaker against G10 currencies. NZD outperforms

This is the first Markets Today for 2026. We wish all our readers a Happy New Year.

US equity futures came under pressure in Asian trade yesterday after US Federal Reserve Chair Powell revealed that the Justice Department was threatening a criminal indictment over renovations of its headquarters. Powell said this was a consequence of its interest-rate policies, which raised further concerns about the central bank’s independence and the strength of US institutions more broadly, amid ongoing political pressure. The US dollar declined in response and precious metals gained on safe haven flows. Gold prices reached to a fresh record high above US$4600 per troy ounce.

S&P futures had declined close to 0.7% but stocks have recovered since the cash market opened. The index is close to flat in US afternoon trading, and only marginally below the record high, reached at the end of last week. An index of US banking stocks fell after President Trump called on credit card companies to cap interest rates at 10% for a year. European equities closed higher and there were decent gains for stocks in Hong Kong and Japan.

The US dollar has made broad based losses against G10 currencies. The move which began in Asia has extended in offshore trade. The US dollar index is close to 0.5% lower from levels that prevailed at the global open yesterday. The NZD has been amongst the strongest G10 currencies set against the weaker US dollar backdrop. The yen is little changed amid growing expectations that the Japanese Prime Minister Takaichi will call for a snap election. A local newspaper suggested early February as a potential election window. NZD/JPY has gained above 91.

US treasury yields were broadly steady in the absence of economic data to provide the market with direction. Supply was in focus with 3-and 10-year auctions scheduled. US 10-year yields are little changed near 4.18% and have traded in a narrow range in 2026. There was limited market impact from the announcement of the criminal investigation into Chair Powell, but markets will likely price in higher inflation expectations and term premium if the Fed’s independence comes under further attack.

Oil prices are steady – Brent crude is trading close to US$63 per barrel - after rebounding last week with unrest in Iran threatening to impact supply from the fourth largest OPEC producer. President Trump said that the US is mulling potential options in response to reports of the deadly crackdowns on protesters and that Iran’s leadership had reached out to seek talks.

It was a quiet start to the week for NZ fixed income markets. Swap rates were largely unchanged in the local session yesterday. Rates have edged lower since the start of the year reflecting in part the rally in Australia. 2-year NZ swap rates closed at 2.89%, the lowest level in a month and close to 25bp below the mid-December peak. Yields across the government curve also remained steady. 10-year government bonds ended the session at 4.40%.

The domestic focus today will centre on the Quarterly Survey of Business Opinion, the first major economic release of the new year and a key source of information for activity and inflation dynamics. US CPI data for December is scheduled later this evening. Core CPI was surprisingly soft in November – the annual rate dropped to 2.6% - with data collection issues related to the government shutdown thought to be a contributing factor. The consensus expects a 0.3% monthly increase for core CPI which would see the annual rate edge higher to 2.7%.

Stuart Ritson is a Markets Strategist at BNZ Markets.