The Federal Reserve's independence is wavering; the high-volatility era for the US dollar has begun in 2026

The Federal Reserve is facing unprecedented political pressure. As the U.S. political environment changes, discussions about the central bank’s independence have shifted from theoretical debates to real conflicts. Jane Foley, Head of FX Strategy at Rabobank, recently stated that the US dollar will face greater volatility in 2026, driven by deep market concerns over the Fed’s future credibility. This not only impacts traditional foreign exchange markets but also has significant implications for crypto asset allocation logic.

The Threefold Pressures Facing the Federal Reserve

According to the latest news, Fed Chair Jerome Powell is currently under multiple political pressures. Market concerns mainly focus on three areas:

• Calls for and pressure to cut interest rates from the government level
• Criminal investigations by the Department of Justice (related to testimonies on the Fed building renovation project)
• Direct threats to current Chair Powell personally

These events break the long-standing perception of the Fed as an “independent institution.” Foley pointed out that the rising pressure alone is enough to alter market pricing logic for the dollar.

The Double-Edged Nature of Rising Volatility

Downward pressure is clear but not out of control

Foley’s analysis captures the key contradiction: uncertainty around the Fed’s credibility indeed exerts downward pressure on the dollar, but “not to the point of causing an uncontrollable collapse.” This judgment is important because it acknowledges risks without exaggerating them.

The Fed has not completely lost its constraints. Foley noted that even if the Fed Chair leans toward rate cuts, other FOMC members may still form a balancing force amid persistently high inflation. This means that Fed decisions will not become entirely political tools, but independence is indeed weakening.

Volatility itself is both a risk and an opportunity

The dollar faces high volatility, which impacts different market participants in vastly different ways. Traditional forex traders must endure greater uncertainty, while hedging asset allocators see opportunities.

According to the latest information, Bitcoin has fallen nearly 30% from its peak at the end of 2025, but analysts remain optimistic about its long-term value as a “currency devaluation trade” tool. Bloomberg’s Eric Balchunas believes this strategy requires patience, and market expectations are that in 2026, Bitcoin will perform bullishly due to institutional hedging against fiat currency devaluation and the Fed’s potential dovish stance.

Meanwhile, gold has broken through the $4,600 level, becoming another asset benefiting from the weakening of Fed independence.

Reconstructing Market Logic

This series of events marks a turning point in the global financial markets. The traditional logic was: high inflation → Fed rate hikes → economic cooling → inflation retreat, making market trends relatively predictable.

But when Fed decisions start to be influenced by politics, this traditional framework is broken. The dollar is no longer a pure safe-haven asset but a direct reflection of political uncertainty. This shift is prompting market participants to reassess asset allocation, with crypto assets gaining re-pricing due to their independence from single central bank control.

Summary

The pressure on Fed independence signals a fundamental change in the underlying logic of the 2026 financial markets. The high volatility faced by the dollar is not a short-term fluctuation but reflects deeper institutional changes. Foley’s analysis reminds us that while this uncertainty is unlikely to cause an uncontrollable dollar collapse, it is enough to redefine global asset allocation priorities. For market participants, the key is not predicting where the dollar will fall but understanding that in this era, the Fed is no longer an absolute “safe anchor.” Diversification, hedging, and alternative assets will become necessary options rather than optional.