Policy uncertainty weighs on dollar as investors await Fed decision amid Trump–Powell tensions
Asian stock markets extended their rebound on Friday after former US President Donald Trump walked back threats to impose tariffs linked to the Greenland dispute, easing immediate trade tensions and lifting investor sentiment across the region.
However, lingering uncertainty over US economic and trade policy continued to pressure the dollar, while pushing gold and other precious metals to fresh record highs.
Investor focus is now shifting to next week’s Federal Reserve policy meeting, following US economic data that broadly matched expectations and renewed concerns about the central bank’s independence amid political pressure on Fed Chair Jerome Powell.
Markets have stabilised over the past two sessions after Trump reversed his earlier warning to impose tariffs on several European countries over their opposition to Washington’s interest in taking control of the Danish autonomous territory of Greenland.
Asian equities followed Thursday’s global rally, with Tokyo, Hong Kong, Shanghai, Taipei, Sydney, Seoul, Singapore, and Bangkok all closing higher.
In Europe, London opened flat, while Paris and Frankfurt slipped in early trade. Wall Street closed higher for a second consecutive session overnight.
Despite the short-term relief, analysts warned that uncertainty remains elevated after Trump’s latest diplomatic confrontations, including renewed pressure on US allies and his recent actions against Venezuelan President Nicolas Maduro, reigniting fears of broader trade disruptions and weakening confidence in US assets.
Market watchers said there is little assurance that relations between the US and Europe have stabilised in a lasting way.
The continued willingness of US policymakers to deploy tariffs over geopolitical disputes has unsettled global markets, weighing on the dollar and driving investors toward traditional safe havens.
In Asian trading, gold surged to a fresh all-time high above $4,967 per ounce, while silver climbed past $99, reflecting strong demand for assets seen as hedges against political and economic risk.
With the Greenland issue temporarily defused, attention has turned back to US economic fundamentals. Revised data showed the American economy grew slightly faster than initially estimated in the third quarter, supported by stronger exports and business investment, figures that were delayed by last year’s government shutdown.
Additional data showed jobless claims edged lower, while inflation eased modestly compared with levels before the shutdown.
The Federal Reserve is widely expected to hold interest rates steady, having already delivered rate cuts at its previous three meetings.
The upcoming decision comes amid a deepening standoff between Trump and Powell, whom the former president has repeatedly criticised for not cutting borrowing costs more aggressively.
Pressure on the Fed chair intensified this month after the administration issued subpoenas signalling a potential investigation into the $2.5 billion renovation of the Federal Reserve’s headquarters, raising concerns about political interference.
“The bar for further rate cuts remains extremely high,” said Michael Hewson of MCH Market Insights, noting that policymakers are likely to favour caution. “That approach is almost certain to draw criticism from President Trump.”
Fiona Cincotta of City Index echoed the view, saying sticky inflation and resilient growth leave the Fed with little incentive to ease policy further for now, reinforcing a wait-and-see approach.
The Fed meeting also coincides with growing speculation over Powell’s successor, with his term set to end in May. Trump told reporters on Thursday that he has a preferred candidate in mind but declined to name them, describing the individual as “very respected” and “well known”.
While the dollar has weakened against most major currencies this week, it edged higher against the yen after the Bank of Japan opted to delay further rate hikes as it assesses the impact of previous tightening measures. Recent data show Japanese inflation remains above the bank’s two per cent target.
In corporate news, Nintendo shares jumped as much as 6.9 per cent in Tokyo after US gaming data firm Circana reported that the company’s Switch 2 console led the US hardware market in both unit and dollar sales in 2025. The stock closed up 4.5 per cent.
“The Switch 2 is now the fastest-selling video game hardware platform in tracked history,” Circana analyst Mat Piscatella wrote on BlueSky.
Looking ahead, markets are bracing for a busy week that includes earnings reports from Apple, Microsoft, Boeing, Tesla, and Meta, alongside the Federal Reserve’s interest rate decision.
Market Snapshot (around 0815 GMT)
- Tokyo (Nikkei 225): +0.3% at 53,846.87
- Hong Kong (Hang Seng): +0.5% at 26,749.51
- Shanghai Composite: +0.3% at 4,136.16
- London (FTSE 100): Flat at 10,152.45
Currencies
- Euro/Dollar: $1.1739
- Pound/Dollar: $1.3496
- Dollar/Yen: 158.50
- Euro/Pound: 86.98p
Commodities
- WTI Crude: +0.5% at $59.63
- Brent Crude: +0.4% at $64.34
US Markets
- Dow Jones: +0.6% at 49,384.01 (close)
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