Markets spooked by Trump’s interest in removing Powell – UBS

US National Economic Council Director Hassett said US President Trump was investigating whether they could fire Federal Reserve Chair Powell. Investors seem less than happy with the idea of a politicized Fed—the US dollar and long-dated government bonds have weakened. There are checks on the president’s authority. Fed governors need to be confirmed by the Senate. The FOMC chair does not have to be the Fed chair. However, some of these checks depend on rule of law, UBS' economist Paul Donovan notes.

Fed independence in focus as political tensions rise

"Arguably, the great moderation of inflation was driven by a trend toward central bank independence. While monetary policy is a relatively blunt weapon, it can be wielded to control medium-term inflation. This depends on trust in the central bank. Building that trust takes years. Losing that trust can happen overnight."

"South Korean export data for the first part of April showed a sharp slowdown in exports. Trade that does not touch the US supply chain should not be too badly hurt. Trade involving the US will be weak reflecting a reaction to early inventory building, the direct effect of tariffs, and expectations of a US economic slowdown."

"In a quiet data calendar, there are a few central bank speakers to focus on—operational independence rather than policy as such might be the focus."