Markets Today: Trump's FED Battle Intensifies, French Stocks Slide on Political Risk, DAX Finds Support at 50-Day MA

[Ben Graham]

Asia Market Wrap - Trump and FED Battle Heats Up

The Asian session saw a shaky start as US President Donald Trump posted on his Truth Social account that Federal Reserve Governor Lisa Cook will be removed effective immediately.

The immediate reaction saw a gauge of the US dollar retreat as much as 0.3% and gold rose as much as 0.6% to around $3385/oz.

The US dollar recovered some losses, and gold gave up some gains after Cook announced she wouldn’t resign. Asian stocks dropped 0.7%, and futures for US and European stock markets also declined.

Short-term Treasury yields fell, signaling increased expectations of a Fed rate cut next month. Meanwhile, 30-year yields rose as investors worried that easier monetary policy could lead to higher inflation.

President Trump made his announcement after the US Department of Justice said it would investigate Cook. This came from a criminal referral by Federal Housing Finance Agency Director Bill Pulte, accusing her of possible mortgage fraud.

This investigation is part of a broader effort by the Trump administration to increase legal pressure on Democratic figures and the central bank. Cook stated that Trump doesn’t have the power to fire her and that she won’t resign. Her lawyer, Abbe Lowell, said they will do whatever is necessary to stop Trump’s “illegal action.”

The Asian session also brought the RBA minutes of the August 11-12 meeting. The minutes showed that the central bank of Australia's board expects to lower interest rates further over the coming year to meet its policy objectives, with the pace of decline likely to hinge on economic data.

European Open - French Stocks Tumble on Political Jitters

French stocks dropped sharply, especially bank stocks, and the country’s bonds also fell on Tuesday as the government faces a growing risk of being removed next month.

Three major opposition parties said they won’t support a confidence vote scheduled for September 8, which Prime Minister Francois Bayrou called to push through major budget cuts.

France’s CAC40 stock index fell over 2%, after dropping 1.6% late Monday. Big banks like BNP Paribas and Societe Generale saw their shares drop more than 6%.

The yield on France’s 10-year government bond rose by 4 basis points to 3.53% early in the day, the highest since March, before settling at 3.50%. (When bond yields rise, their prices fall.)

The gap between French and German 10-year bond yields, which shows the extra risk investors see in holding French debt, widened to 79 basis points, the largest since April.

Analysts expected political tensions in France to rise in the fall as the government works to gain support for improving the country’s finances. However, Monday’s events were unexpected.

If Prime Minister Bayrou loses the confidence vote in the National Assembly, his government will collapse. President Emmanuel Macron could then appoint a new prime minister, ask Bayrou to lead a temporary government, or call for an early election.

Looking at major European indexes, the DAX was down as much as 1% in early trade but has since pared some losses trading around 0.54% at the time of writing. The industrials and financial sectors weighed on the index with losses of 1.28% and 1.58% respectively.

The FTSE 100 which enjoyed a good run last week with fresh all-time highs is also struggling this morning. The index is down around 0.8% at the time of writing with consumer cyclicals and financial the biggest losers on the day with Standard Chartered PLC down as much as 2.89%.

On the FX front, The euro and British pound stayed mostly unchanged against the dollar, trading at $1.1617 and $1.3461, respectively. Other currencies, like the Japanese yen and Swiss franc, also saw little movement.

The dollar index, which tracks the dollar against six major currencies, remained steady at 98.42 after recovering from an earlier 0.4% drop. Meanwhile, China’s offshore yuan traded at 7.1635 per dollar, near its strongest level in a month, as the stock market continued to rise.

Currency Power Balance

Source: OANDA Labs

Oil prices dropped on Tuesday after rising nearly 2% the day before, as traders kept an eye on the war in Ukraine and possible disruptions to Russian fuel supplies.

Brent crude fell by 51 cents (0.7%) to $68.29 a barrel, after reaching its highest level since early August in the previous session. West Texas Intermediate (WTI) crude dropped 57 cents (0.9%) to $64.23.

Gold prices experienced whipsaw price action in the Asian session but has since steadied around the $3370/oz handle.

For more on Gold, read Gold (XAU/USD) Technical: Push up towards medium-term range resistance zone as Fed’s independence erodes

Economic Data Releases and Final Thoughts

Looking at the economic calendar, a quiet day ahead in terms of data. A few cCentral Bank speakers from the ECB, FED and BOE.

In the US session we will get the latest consumer confidence numbers before attention will likely turn to the ongoing battle between the FED and President Trump.

Geopolitical risks and the discussions between the US/Ukraine/Russia could also impact sentiment if there are any developments.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Chart of the Day - DAX Index

From a technical standpoint, the DAX index has been struggling to make a fresh high following the July 10 print at around the 24655 handle.

Since then we have seen two attempts to run toward this all-time high met with significant selling pressure resulting in a lower high being formed on July 24 and the most recent on August 15, when price reached 24547.

There is a bulls flag pattern in play on the daily chart which thus far has held firm but does bode well for a bullish breakout.

However, a deeper correction cannot be ruled out, and a lot of this will rest on sentiment in the days ahead.

For now though the index has found support with the 20 and 50-day MAs resting at 24163 and 24059 respectively, with the key psychological 24000 level just below.

This makes the 24000-24160 level a critical area of support, which if it holds could signal further upside.

Keep an eye on the period-14 RSI which for now is flirting with the neutral 50 level. A break below could be seen as a sign that momentum is shifting from bulls to bears while bounce at this level could embolden bulls and lead to a rally higher once more.

DAX Index Daily Chart, August 26. 2025

Source: TradingView.com (click to enlarge)

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