Trump fires Fed governor as global markets tumble on independence fears

​​​Morning Market Update: Trump Fed Move Rocks Global Markets

​President Trump's shock decision to fire Federal Reserve (Fed) Governor Lisa Cook has sent ripples through global financial markets this morning, with the FTSE 100 opening 0.7% lower as traders scramble to assess the implications for central bank independence.

​FTSE 100 Falls From Record High

​The UK's benchmark index has opened sharply lower, retreating from recent record highs as heavyweight stocks including British American Tobacco and HSBC weigh on performance. Sterling is holding steady at $1.34 against the US dollar, though gilts are falling across the curve and underperforming continental European peers.

​The decline comes after European bond yields rose yesterday while UK markets were closed for a public holiday. Gilt yields are rising as much as nine basis points on the 30-year bond, taking them close to the 1998 levels seen early last week.

​British American Tobacco is under pressure after announcing CFO Soraya Benchikh is stepping down effective today. Javed Iqbal will serve as interim CFO while the company searches for a permanent successor, though CEO Tadeu Marroco reiterated the firm remains "firmly on track" to meet full-year guidance.

​Corporate Updates Weigh on Sentiment

​Bunzl shares are among the worst FTSE 100 performers, down 28% year-to-date despite reiterating its 2025 outlook. The distribution group's first-half sales were in line with expectations, though management described the operating environment as "challenging."

​Wood Group provided an update on its ongoing M&A saga, with Sidara reducing its possible offer to 30 pence per share. Should a firm offer materialise, Wood's board would be minded to recommend it to shareholders, with the deadline extended to 5pm on 28 August.

​UK grocery price inflation edged up to 4.2% in August according to British Retail Consortium data, the highest level since February. Retailers warn inflation could hit 6% by year-end as they grapple with £26 billion in payroll tax hikes and minimum wage increases.

​Asian Markets Lead Global Sell-Off

​The Nikkei 225 dropped 1% to two-week lows as the Japanese yen strengthened sharply against the dollar, putting pressure on Japanese exporters including Toyota and Honda. The move against Cook, whose term was set to run until 2038, has raised serious questions about Fed independence.

​Currency markets are pricing in this uncertainty, with the dollar weakening against major peers. The unprecedented nature of Trump's action - removing a sitting Fed governor outside normal procedures - has shaken confidence in US institutional integrity.

​Bond Markets Flash Warning Signals

​US Treasuries present a mixed picture, with longer-dated bonds selling off while shorter maturities rally. This unusual dynamic suggests markets expect near-term rate cuts while worrying about longer-term institutional damage to the Fed's credibility.

​Federal funds futures now price in 83% odds of a September rate cut, up dramatically from previous expectations. The shift in rate expectations is driving significant moves across forex markets.

​Safe Havens Rally on Uncertainty

​Gold has touched two-week highs as investors pile into traditional defensive assets. The precious metal benefits from both dollar weakness and broader concerns about US policy predictability. Commodity trading is seeing increased activity as traders position for continued uncertainty.

​What UK Traders Need to Watch

​European markets are expected to follow Asian weakness, while US futures point to a difficult Wall Street open. UK traders should monitor any Fed response to Trump's action and watch for further gilt weakness if Treasury selling continues.

​For those looking to navigate this volatility, our trading platform provides access to real-time pricing across all major asset classes affected by these developments.

​Bottom Line

​Trump's unprecedented Fed move has shaken global market confidence, with UK markets joining the worldwide sell-off. Traders should expect continued volatility until there's clarity on the legal status and broader implications for monetary policy independence.