The financial markets have recently been shaken by a major news event—on January 15th, the Department of Justice suddenly revealed an investigation into Federal Reserve Chair Jerome Powell. This was originally a move by Trump to pressure Powell into stepping down, but it instead angered the markets and backfired, causing self-inflicted damage.

The turning point of the situation is quite interesting. According to previous reports, Trump and Powell had a private agreement: as long as Powell resigned after his chairmanship ended in May, Trump would stop criticizing the Fed’s multi-billion dollar refinancing projects. It sounded like a mutually beneficial deal.

However, once the DOJ investigation was announced, market reactions instantly reversed. Polymarket data clearly reflected this: the probability of Powell leaving before the end of May dropped from 74% in early January to 45%, and the chance of him leaving by the end of the year also fell from 85% to 62%. Conversely, the likelihood of him remaining until 2028 increased significantly.

What’s more awkward is that the candidates’ standings are also shifting. Originally, Trump favored Haskett, but his support has been overtaken by the more hawkish Kevin Waugh. Policy analyst Dan Clifton pointed out that Trump’s continued pressure on Powell might actually increase the chances of Powell remaining at the Fed as a regular board member. This move now seems to be falling short.

In simple terms, from trying to oust Powell to watching hawkish candidates potentially take over, this game between Trump and the Fed has already become somewhat passive at the very start. How the rest of the year will unfold is likely to be a prolonged tug-of-war. The increased policy uncertainty will undoubtedly impact market sentiment.