The US dollar lost some of its value recently. This happened after news broke that the Department of Justice is looking into a criminal matter. They are investigating renovations at the Federal Reserve buildings in Washington. They are also looking into things Fed Chair Jerome Powell said to Congress.
An expert from Standard Chartered thinks this market drop might be over quickly. He says that starting an investigation is not the same thing as a formal charge. If no one is actually accused of a crime the worry about Jerome Powell will likely go away. People are waiting to see if anything real comes from the probe.
It is important to remember that a subpoena does not mean someone is guilty. Lawyers would have to prove that people meant to trick the public. The expert believes it will be very hard for the government to prove that. Because of this he expects the dollar to bounce back once the news settles down.
There is still a risky side to this story. If an indictment actually happens it could lead to the Fed Chair being fired. This could even spread to other leaders at the Federal Reserve. If people start losing their jobs it would make people worry about the independence of the bank. This would likely hurt the value of the dollar even more.
The dollar might stay steady while everyone waits for more news. However government bonds are in a more dangerous spot right now. Interest rates on long-term loans are already starting to rise because of the uncertainty. Investors are feeling nervous about what happens next with the central bank.
New data about inflation is coming out very soon. If prices are still rising too fast it could cause more trouble for the markets. Investors might start demanding more money in exchange for the risk they are taking. This kind of shift in the market can happen very fast and catch people by surprise.
