Trump Looks to Fire Fed Governor

STOCK INDEX FUTURES

Stock index futures are lower as markets absorb President Trump’s firing of Fed Governor Lisa Cook. President Trump said late Monday that there was “sufficient cause” to fire Cook, a Biden-nominated governor, over allegations of mortgage fraud. Cook responded by saying Trump didn’t have the authority to fire her and that she wouldn’t step down.

Sales of new single-family homes in the US dipped slightly by 0.6% in July to an annualized rate of 652,000 units, still beating expectations of 630,000. Regional declines in the Midwest and South offset gains in the West, while the Northeast held steady. Inventory also fell modestly, and the median price dropped 0.8% to $403,800. The data shows the housing market remains stagnant, with falling inventory and softening prices pointing to weak underlying demand and limited pricing power, reinforcing the view that the market is still struggling to gain momentum. Durable goods orders fell 2.8% in July, a better-than-expected reading and a recovery from June’s 9.3% drop in orders.

Indexes retreated on Monday ahead of Nvidia’s earnings report on Wednesday as traders remained mindful ahead of Friday’s PCE data after digesting Powell’s comments from Friday. Powell signaled concern over a weakening labor market and opened the door for a rate cut this year, the timing of which will most likely be data dependent. Markets now price in an 84% chance of a cut, pending confirmation from upcoming data, especially July’s core PCE inflation and August nonfarm payrolls. Friday’s data on July PCE inflation—the Fed’s preferred measure of inflation—will be the next key item of data ahead of the central bank’s September policy meeting.

Elsewhere on the data front, housing price index data is due at 8:00 a.m. CT, CB consumer confidence survey results are due at 9:00 a.m. CT, the second estimate of second-quarter GDP and weekly jobless claims data are due on Thursday, while the University of Michigan’s final consumer survey for August is set for release on Friday.

CURRENCY FUTURES

The USD index is lower after falling sharply following President Trump’s announcement that he would be firing Fed Governor Lisa Cook over allegations of mortgage fraud. The dollar recovered some of its losses in the overnight session following the news. The move marks a sharp escalation in the president’s battle against the Fed and continues to raise worries in the markets over the central bank’s independence, especially as the president has attacked the bank and Chair Powell for not lowering interest rates. Cook said the president has no authority to fire her from the central bank, and that she will not resign. While the news is bearish for the dollar, uncertainty overseas in Europe regarding France’s government limited losses against the euro. Markets are pricing in an 84% chance of a 25 bps rate cut in September ahead of Friday’s PCE data.

Euro futures are higher, gaining on a weaker dollar, although gains could be limited after political developments in France make it look increasingly likely that the minority government will be ousted. The developments come as French consumer confidence in August fell, with the index dropping to 87 from 88. Germany’s GfK consumer climate survey is due on Wednesday. German business confidence improved slightly this month, a survey showed, offering a glimpse of hope for an economy struggling to gain momentum. The Ifo Institute said Monday that its business-climate index increased to 89.0 in August from 88.6 in July. Companies were brighter about their prospects ahead but a little more pessimistic about current conditions. The European Union and Italy will release consumer and business confidence data for August on Thursday. These come after recent better-than-expected provisional August purchasing managers’ surveys for Germany, France, and the eurozone, and investors will be looking to see whether this trend is replicated elsewhere. Friday will be a big day for eurozone data. Provisional inflation figures for August from Germany, France, Spain, and Italy will be released, alongside German labor market data for August. German retail sales for July are also due Friday, plus a string of data from France, including July consumer spending, producer prices, and second-quarter jobs figures. Italy will also publish second-quarter GDP.

British pound futures are higher against the dollar following President Trump’s announcement to fire Fed Governor Lisa Cook. British Retail Consortium’s shop price index for August showed that prices rose 0.9%, in line with expectations. It is a quiet week of data over in the UK, with the only event on the economic calendar being the Nationwide August house price index due later in the week. Money markets now see only around a 36% probability of a quarter-point reduction this year and the next cut likely priced in for spring 2026. This comes after a hot inflation print last week, which saw inflation rise to 3.8%, although many of the price pressures are expected to be one-off. Still, the inflation remains well above the Bank of England’s target, and in its most recent policy meeting, policymakers signaled they were more concerned with rising inflation than they were with supporting the economy. A reduction in the amount of easing this year should provide support to the pound over the dollar.

Japanese yen futures are higher. Core CPI came in at 2.0% on an annualized basis, below estimates of 2.4% and falling from the previous reading of 2.3%. Markets will now look to Tokyo inflation, considered the leading gauge of nationwide trends, for more signals on the inflation front as the bank looks to raise interest rates in the near future. Speaking at the Federal Reserve’s Jackson Hole conference on Saturday, Bank of Japan Governor Kazuo Ueda said wages in Japan are expected to rise further amid a tightening labor market, signaling confidence that conditions for another interest rate hike are coming together. Following stronger-than-expected second-quarter growth, investors will look to the next batch of data for confirmation of the economy’s health. Looking ahead, Tokyo inflation, retail sales, labor-market, and industrial production data are due for release later in the week. Strong data here could fuel expectations on when the Bank of Japan will deliver a rate hike, which could come as early as October.

Australian dollar futures are little changed following a bearish tone from the Reserve Bank of Australia’s meeting minutes. The RBA acknowledged easing cost pressures, citing rising global and domestic uncertainties—especially around trade policy. While it expects household consumption to improve as real incomes rise, weak demand in some sectors is limiting firms’ pricing power, prompting a data-driven approach to future policy decisions. Inflation figures on Wednesday will offer further clarity on the extent of future easing.

INTEREST RATE MARKET FUTURES

Futures are little changed across the curve, apart from the 30-year bond, which is down sharply following President Trump’s announcement that he is firing Fed Governor Lisa Cook. The move is the biggest step yet in his effort to pressure the central bank and its authority on interest rates. Trump’s decision to remove Cook is poised to set up a clash over how much power the president has at the central bank. Cook said late Monday night that Trump has no authority to fire her and that she would continue in her job. The legal battle is likely to stir short-term volatility in the markets ahead of Friday’s PCE inflation data, with longer-dated yields likely to remain elevated as a result.

Friday’s July PCE price index will be closely watched. Stronger inflation could reinforce expectations of a slower easing path, pushing expectations of a September cut to October or later in the year and providing support for higher yields, while a softer reading should weigh on yields. Fed funds futures are pricing an 84% chance that the Fed will cut rates by 25 bps in September.

There is still a high degree of uncertainty when it comes to the interest rate path, and recent PMI and PPI data has shown significant indications that inflation could persist for the coming months and peak in the fall.

Yields rose Monday as investors turned cautious ahead of upcoming data this week and as markets digested Powell’s comments, with markets inferring that a rate cut in September is likely but not guaranteed. Powell emphasized that while unemployment remains low, risks to the labor market are building and monetary policy is still “restrictive,” suggesting that adjustments may be warranted. He also cited changes in tax, trade, and immigration policies as factors reshaping the economic outlook.

The Treasury will sell $69 billion in two-year notes on Tuesday, $70 billion in five-year notes on Wednesday, and $44 billion in seven-year notes on Thursday.

The spread between the two- and 10-year yields rose to 57.2 bps from 55 bps on Thursday.

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