Markets are still pricing calm, but could they be ignoring a storm. The attempt to fire Fed Governor Lisa Cook has become more than just another Trumpian tantrum. It signals a blatant willingness to weaponise the Federal Reserve, and that has consequences far beyond Washington.

When the independence of the world’s most influential central bank is compromised, the pricing of US debt, the stability of the dollar, and the structure of global capital flows all shift; and you can bet your bottom dollars that the tough guy behind this shock-and-awe understands this pretty well and simply does not care.

Needless to say, of course, that all this would not have been such a big deal if US economic/financial outlook didn’t (very) directly affect all global markets also; some directly, some with some lag.

For decades, the “full faith and credit” of US institutions has underpinned the dollar’s role as the world’s reserve currency. That faith was not built on America’s size alone, but on the credibility of its systems. Undermining the Fed risks unanchoring that credibility, raising questions in the very markets that set the price of money. If investors start demanding a higher risk premium on US Treasuries, the ripple effects will extend through currencies, equities, and commodities alike.

This is not theoretical. The bond market has already begun to react at the margins. Treasury yields spiked briefly before retracing, but the repricing of forward curves shows early signs of creeping unease. Markets are firmly placing their bets on a September Fed rate cut — with CME FedWatch showing around an 86–87 percent probability. Yet the backdrop of political turmoil and volatility around monetary policy is prompting more cautious positioning,........

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