Global Markets: Dollar and Yields Rebound as Investors Weigh 2026 Fed Leadership Risks

The trading year 2026 has commenced with a resurgence in US Treasury yields and a bounce in the Greenback, as markets recalibrate rate expectations and look ahead to a pivotal shift in Federal Reserve leadership.

Yields and Dollar Stage Recovery

Global financial markets signaled a shift in sentiment during the first trading week of 2026. While European equities hit record highs, the US bond market saw significant volatility. The US 10-year Treasury yield staged a V-shaped recovery, rising 2.57 basis points to close at 4.1926%, marking a weekly increase of over 6 basis points.

This steepening of the curve provided fresh support for the US Dollar, which rebounded from recent lows to approach a one-week high. The currency's resilience comes despite mixed equity performance, where Nasdaq slipped marginally by 0.03% and Tesla dragged on consumer discretionaries with a 2.6% decline following missed delivery estimates.

The 'Powell Pivot' Risk

Macro traders are now focusing on a critical timeline: the expiration of Federal Reserve Chair Jerome Powells term on May 15, 2026.

Market speculation is intensifying regarding President Trumps potential nominee to replace Powell. Trump has frequently criticized Powell for not being aggressive enough on rate cuts. Current consensus points toward Kevin Hassett, a long-time Trump ally, as a leading candidate (estimated 47% probability).

Asian Markets & CNY

In Asia, the Offshore Yuan (CNH) showed strength, breaking below the 6.97 handle for the first time in over two and a half years, driven by stimulus bets. Chinas “National Team” continues to support the semiconductor sector, with the Big Fund doubling its stake in SMIC to 9.25%, signaling Beijing's unyielding focus on technological self-sufficiency amid trade frictions.