HG MARKETS:

With the Federal Reserve’s next policy meeting scheduled for May 6-7, the central bank is set to enter its pre-meeting blackout period on April 26. During this time, officials will refrain from public commentary. Market consensus suggests that the Fed is unlikely to alter its current policy stance, with data from the CME FedWatch Tool showing only a 10% chance of a 25 basis point rate hike. Despite a broadly hawkish tone from policymakers, the general view remains one of caution, as echoed by Fed Chair Jerome Powell.

Speaking in early April at the Economic Club of Chicago, Powell emphasized the Fed’s patience, stating that officials were in no rush to adjust rates and preferred to wait for greater clarity on economic conditions. He also highlighted the uncertain inflationary implications of tariffs introduced under President Trump’s new trade regime, suggesting these effects could linger depending on how inflation expectations evolve.

Other Fed voices have echoed similar concerns. St. Louis Fed President Alberto Musalem warned that if inflation expectations were to become unanchored due to persistent tariff-related price pressures, the central bank would need to put inflation control above all else. Minneapolis Fed President Neel Kashkari reiterated the Fed’s core responsibility to keep inflation contained.

Despite these hawkish leanings, the US Dollar has been on the back foot. The USD Index has dropped about 6% in April after a 3% loss in March. Fears that the tariffs could drag on US economic growth appear to be driving this weakness, overshadowing the Fed’s firm tone on inflation.

Adding to the pressure on the greenback are mounting concerns about the Fed’s independence. Tensions escalated when President Trump publicly criticized Powell in a social media post, calling him “too late and wrong” ahead of a key European Central Bank meeting. The situation intensified when economic adviser Kevin Hassett revealed that the White House was exploring whether Powell could be dismissed—a notion previously considered off-limits.

The market has not reacted kindly. The USD Index tumbled to its lowest point in nearly three years, slipping below 98.00. Economist Paul Donovan from UBS remarked that investors are uneasy with the idea of a politicized central bank. While there are institutional safeguards in place, such as Senate confirmation of governors, faith in those checks is being tested.

As the Fed prepares to meet, markets are watching not just rates—but credibility