Market Wrap 2026-01-12

Core-Brief

12 Jan 2026 — 11 min read

Federal prosecutors in the US have initiated a criminal investigation into Federal Reserve Chair Powell regarding the central bank's headquarters renovation in Washington, and whether Powell provided false testimony to Congress about the project's scope, according to a report citing officials.
US President Trump stated that Iran has proposed negotiations following his threat of action against Tehran due to the crackdown on protesters, as reported by AP News.
US President Trump is scheduled to receive a briefing on Tuesday regarding "some kinetic and many non-kinetic" options concerning Iran, according to a Politico report citing two administration officials.
European stock markets are generally declining, mirroring pressure on US equity futures; banking stocks are affected following Trump's proposal to limit credit card interest rates.
The US Dollar Index (DXY) is under pressure as Chair Powell faces a criminal investigation, while the New Zealand Dollar (NZD) is benefiting from strength in underlying metals prices.
The US yield curve is steepening amid concerns about Federal Reserve independence, with supply anticipated.
Spot gold reached an all-time high above USD 4.6k/oz, driven by concerns over Federal Reserve independence and geopolitical factors; crude oil is declining despite heightened tensions related to Iran.
Upcoming events include speeches from Federal Reserve officials Bostic and Barkin, as well as supply data from the US.

EUROPEAN TRADE

EQUITIES

European equities (STOXX 600 -0.2%) are mostly trading negatively, contrasting with a generally stronger session in the Asia-Pacific region. Sentiment appears to be dampened by concerns over Federal Reserve independence, following the commencement of a criminal investigation into Chair Powell.
European sectors are showing mixed performance. Leading sectors include Basic Resources (+0.6%), Food Beverage and Tobacco (+0.3%), and Retail (+0.3%). Basic Resources is supported by stronger metal prices. Conversely, Autos (-0.9%), Banks (-0.9%), and Travel (-1.4%) are lagging, with the banking sector facing pressure from Trump's plan to cap credit card fees.
US equity futures are declining in pre-market trading, with losses across all major indices. Shares of large US banking companies such as JP Morgan (-2.4%), Citi (-3.6%), and Bank of America (-1.5%) have decreased in pre-market trading due to Trump's credit card fee cap proposal.

FX

The DXY is experiencing downward pressure this morning as Federal Reserve independence is once again in focus. It is currently trading near the lower end of a 98.70-99.24 range, just below its 200-day moving average (DMA) at 98.82. Further downward pressure could lead to a test of its 100-DMA at 98.62.
The decline in the USD this morning can be attributed to concerns about Federal Reserve independence. Specifically, federal prosecutors have initiated a criminal investigation into Federal Reserve Chair Powell regarding the central bank's renovation of its Washington headquarters. Markets appear to be reacting with a "sell America" sentiment, as the USD and US equity futures decline and the yield curve steepens. The USD may also be affected by the affordability implications of Trump's demand to cap credit card rates at 10%.
The JPY is the only currency holding steady against the USD, with USD/JPY currently trading between 157.90 and 158.20. The JPY experienced downward pressure overnight following further reports that Prime Minister Takaichi is planning to dissolve the Lower House. This was initially reported last Friday, leading to significant gains in USD/JPY. Since then, price action has stabilized, with USD/JPY gradually moving back towards overnight lows as risk sentiment remains subdued.
Other G10 currencies are strengthening against the USD to varying degrees. The Antipodean currencies are among the top performers, benefiting from strength in the metals complex. The CHF appears to be the preferred safe-haven currency this morning, currently ranking second among G10 currencies.

FIXED INCOME

Fixed income benchmarks are trading near unchanged levels.
Overnight, the bias was modestly downward as the US yield curve steepened due to concerns about Federal Reserve independence and the idea that a more dovish Federal Reserve could lead to higher inflation and, consequently, higher rates in the future.
US Treasury notes (USTs) are at the lower end of a 112-02 to 112-11 range, with losses of up to five ticks. Support is located at 111-31 from Friday, with 111-26 from late August below that. The 10-year yield is at a peak of 4.2%, just below last Friday's high of 4.21%. Beyond that, levels from early September/late August are observed, when 4.35% was reached (August 18th).
In Europe, the situation is similar. Bunds were mostly unchanged for much of the session but are now incrementally firmer within 127.82 to 128.10 parameters. Elsewhere, Gilts opened near unchanged before experiencing modest pressure, mirroring the above. They are at the lower end of a 92.30-53 band, with a maximum downside of 18 ticks.
French OATs are awaiting Wednesday's no-confidence motions against the French government regarding Mercosur. Two no-confidence motions will be presented on Wednesday, January 14th, one from the far-left (LFI) and another from the far-right (RN). Neither motion is expected to pass, as LFI will not support RN, and the Socialists (PS) will not support LFI. However, a centrist official noted that "there could be an accident". Amidst this, the OAT-Bund 10-year yield spread remains just above 71 basis points and at the top end of the 69-72 basis points 2026 range. OATs themselves are trading in line with fixed income peers, as updates surrounding Federal Reserve Chair Powell dominate, and are therefore nearly flat.

COMMODITIES

Crude oil benchmarks are starting the week softer, with modest pressure of approximately USD 0.50/bbl, reaching lows of USD 58.64/bbl for WTI and USD 62.89/bbl for Brent. Benchmarks spent Asia-Pacific trade fluctuating within relatively wide bands exceeding USD 1.00/bbl. The complex began the Asia-Pacific session firmer, peaking at USD 59.80/bbl and USD 64.00/bbl, driven by increased geopolitical tensions, particularly related to Iran. However, despite escalatory remarks from President Trump that Iran is beginning to cross the line, the benchmarks failed to sustain early gains and subsequently came under modest but notable pressure, slipping into negative territory.
Spot gold opened slightly firmer, reaching a low of USD 4,511.41/oz before gradually increasing as the Asia-Pacific session progressed. Subsequently, the yellow metal surged beyond USD 4.6k/oz, reaching a new all-time high of USD 4,601.19/oz. Since then, spot gold has retreated below USD 4.6k/oz, although it remains within a few dollars of that level. Price action during European trade has been sideways.
The upside for the yellow metal can be attributed to two factors that have attracted safe-haven inflows: 1) concerns about Federal Reserve independence and 2) heightened geopolitical tensions. Regarding the Federal Reserve, US federal prosecutors have opened a criminal investigation into Federal Reserve Chair Powell regarding the central bank's renovation of its Washington headquarters, and whether Powell lied to Congress about the scope of the project. This has raised concerns among traders regarding the Federal Reserve's independence, given Trump's continued attempts to threaten Chair Powell's job.
Base metals have followed the metals sentiment, with 3-month LME Copper currently up by around +1.7% and trading towards the upper end of a USD 13,086-13,233/t range. In Shanghai, tin hit its daily limit, rising 8% to CNY 376,920/ton to set a new all-time high.
Kazakhstan oil shipments from the Black Sea CPC terminal were halted on Saturday, according to a Bloomberg report citing sources, causing crude intake into the pipeline system to stop.
Hunan Silver has restarted production on January 12th, following the completion of its maintenance plans.
Australian Resources Minister King stated that Australia is to have an operational critical minerals reserve by year-end.
Trafigura's CEO expects to load the first vessel for Venezuelan oil exports to the US next week.
China is buying at least 10 cargoes of US soybeans for April-May shipment, according to traders.

TRADE/TARIFFS

India announces plans to conclude a Free Trade Agreement (FTA) with the EU during a visit to the EU next week.
The EU Commission issues a Guidance Document on the submission of price undertaking offers for battery electric vehicles from China. "It covers various aspects to be addressed in a possible undertaking offer, including the minimum import price, sales channels, cross-compensation, and future investments in the EU."
China's Commerce Minister stated that the EU will release a guidance document on submitting price commitment applications regarding talks with the EU on electric vehicles. The EU will assess every price commitment application based on WTO rules.
India's Trade Minister stated that they are in the 'final' stages regarding a trade deal with Europe.
China is resuming its soybean auctions after a three-week pause to free storage while continuing US purchases under the trade truce.
The US is to host a meeting on rare earths this week, according to Bloomberg.

NOTABLE EUROPEAN DATA RECAP

EU Sentix Index (Jan): -1.8 vs. Expected -4.9 (Previous -6.2)
Swiss Consumer Confidence (Dec): -31 vs. Expected -33 (Previous -34)

CENTRAL BANKS

Federal prosecutors have opened up a criminal investigation into Federal Reserve Chair Powell regarding the central bank’s renovation of its Washington headquarters and whether Powell lied to Congress about the scope of the project, according to a report citing officials.
Federal Reserve Chair Powell stated that the Department of Justice served the Federal Reserve with subpoenas, threatening indictment; Powell said he will continue to do the job. Federal Reserve Chairman Powell said the Department of Justice is threatening a criminal indictment against him. The Federal Reserve Chairman said it is about his testimony in front of the Senate Banking Committee last June, but called this a pretext. The Federal Reserve Chairman thinks this is really about interest rates saying, "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President."
US President Trump denies involvement in the Department of Justice's issuance of a federal subpoena to the Federal Reserve; issued subpoenas unrelated to interest rates.
US Senator Tillis criticizes the move against Federal Reserve Chair Powell and said he will “oppose the confirmation of any nominee for the Fed—including the upcoming Fed Chair vacancy—until this legal matter is resolved.
Goldman Sachs expects the Federal Reserve to deliver 25 basis point cuts in June and September (versus a prior forecast of cuts in March and June).
ECB's Muller stated that there is no reason to ease further in the near term and that rates have been in the right place for some time. Rates, however, could edge higher in a few years.
ECB's de Guindos stated that the USD is not behaving as a haven at this point.
ECB Bulletin: "Inside the food basket: what is behind recent food inflation?"; "Looking ahead, food inflation is expected to ease further, supported in the near term by easing selling price expectations".
Former PBoC Director of Statistics and Analysis Department Songcheng expects the central bank to take "small steps" toward monetary easing in the near future, according to a report citing a speech.
The South African Reserve Bank (SARB) is reportedly working on a review of its Prime Lending Rate, via Bloomberg. This has historically been fixed at the policy rate +350bps.

NOTABLE US HEADLINES

US GOP policymakers are reportedly getting behind a stock-trading clampdown which aims to alleviate concerns related to lawmakers profiting off insider information, via WSJ
US President Trump is to meet with US Secretary of State Rubio at 15:30GMT/10:30EST.
US President Trump said he is going to Detroit to talk about car factories opening up.
US President Trump said he might veto extension of health insurance subsidies.
US President Trump said jobs report today was an amazing report; on posting data early, they gave me some numbers, and when they do, I post.
US President Trump said on January 30th, there may be another shutdown; we'll see.
US President Trump said credit card companies will be in violation of law if they do not comply on interest rate cap by January 20th.

NOTABLE US EQUITY HEADLINES

US President Trump said he might block Exxon (XOM) from drilling in Venezuela following comments by the Co.'s CEO, according to the WSJ.
The White House said it was displeased with Exxon’s (XOM) reaction; Officials hint that Exxon might be kept out with regards to Venezuela.
A judge grants the US FTC request to block Edwards Lifesciences Corp's (EW) acquisition of JenaValve Technology Inc, via court records.

GEOPOLITICS

RUSSIA-UKRAINE

Ukraine President Zelensky said US President Trump should enter a free trade deal with Ukraine .
Over the weekend, Ukraine targeted three drilling platforms in the Caspian Sea owned by Lukoil. Elsewhere, Russian troops struck a Ukrainian military-industrial and energy facilities , according to TASS.

MIDDLE EAST

US President Trump said Iran has proposed negotiations after US leader threatened action on Tehran for crackdown on protesters, AP News reported.
US President Trump said the military is considering very strong options on Iran.
An increase in the number of US planes near Iranian airspace, according to Israel's Channel 14.
US President Trump said Iran called to negotiate yesterday on nuclear, we may meet them.
US President Trump said Iran has proposed negotiations after US leader threatened action on Tehran for crackdown on protesters, AP News reported.
US President Trump said Iran called to negotiate yesterday on nuclear, we may meet them.
An increase in the number of US planes near Iranian airspace, according to Israel's Channel 14.
US President Trump said "Iran is starting to cross it [Trump's red line]".
US President Trump said the military is considering very strong options on Iran.
Iran, in a letter to the UN, said the US is to blame for the transformation of a peaceful process into violent subversive acts and widespread vandalism.
Iranian Foreign Ministry spokesperson Baghaei said communication with the US Special Envoy is open. Adds, they are ready to negotiate on the basis of mutual respect.
US President Trump said in contact with Iranian opposition leaders.

OTHERS

German Finance Minister Klingbeil said the transatlantic relationship "is disintegrating", Die Zeit reported. Adds, We must further strengthen Europe, and we must do so much faster. The current pace is inadequate. European sovereignty now has top priority".
A State Department Spokesperson said US Secretary of State Rubio spoke with Mexican Foreign Secretary de la Fuente today about the need for stronger cooperation against narcoterrorists and trafficking of fentanyl and weapons.
US President Trump posted a picture in which he is labelled "Acting President of Venezuela", via Truth Social.
US President Trump said we are going to have Greenland, one way or another. We are talking about acquiring, not having short-term.
US President Trump said working well with Venezuela's leadership. Meeting with Machado is on Tuesday or Wednesday.
Trump administration officials are set to meet with Danish officials about Greenland on Wednesday, diplomatic sources tell CBS News. Multiple European diplomats said that they increasingly understand that America's commitment to the defence of Europe and NATO is no longer as ironclad as it has been over the past decades.
Trump administration officials are set to meet with Danish officials about Greenland on Wednesday, diplomatic sources tell CBS News. Multiple European diplomats said that they increasingly understand that America's commitment to the defence of Europe and NATO is no longer as ironclad as it has been over the past decades.
North Korea accused South Korea of provocation via a drone, via local press.

CRYPTO

Bitcoin is slightly lower and trades just above the USD 90k mark; Ethereum is moving higher, currently trading just above the USD 3.1k mark.

APAC TRADE

Asia-Pacific stocks were mostly positive, following the positive sentiment seen in the US during Friday's session. Japanese traders were absent today due to a domestic holiday.
The ASX 200 saw gains of as much as 0.7% as the Asia-Pacific session began but pared back slightly as gold prices pulled back from new record highs. Despite spot gold pulling back, gold miners outperformed, followed by consumer discretionary and energy sectors.
The KOSPI was the Asian outperformer, with gains as much as 1.5%, but the index completely reversed the move alongside further losses in tech-laden Nasdaq futures.
The Hang Seng and Shanghai Composite conformed to the regional gains, although upside was capped amid a lack of major drivers for the bourses.

NOTABLE ASIA-PAC HEADLINES

China Vanke (2202 HK) dollar bondholders have been advised to consider calling a default on the company's notes, according to a Bloomberg report citing sources.
China's MOFCOM says its key priorities are to strengthen legal frameworks , improve export controls, and enhance risk prevention to safeguard supply chain resilience and national security.

NOTABLE APAC DATA RECAP

Australian Household Spending MoM (Nov): 1.0% vs. Expected 0.6% (Previous 1.3%)
Australian ANZ-Indeed Job Advertisements MoM (Dec): -0.5% vs. Expected 0.5% (Previous -0.8%)
Australian Household Spending YoY (Nov): 6.3% vs. Expected 5.7% (Previous 5.7%, Revised 5.6%)