The loonie is up amid Trump’s Fed probe. Who that will help — and hurt?

Canadian consumers and businesses could see some short-term benefits from the latest news out of the U.S. concerning the Federal Reserve, but there are also severe long-term risks.

The Canadian dollar rose on Monday as the U.S. dollar fell after U.S. Federal Reserve Chair Jerome Powell said the Department of Justice (DOJ) has served the central bank with subpoenas and threatened it with a criminal indictment.

Powell said in a video statement that the U.S. DOJ’s allegations related to testimony given in the summer of 2025 about renovations to some of the Federal Reserve’s office buildings.

He added that he believes the allegations were a pretext for the Trump administration to have more control over monetary policy and interest rates in the United States.

That warning by Powell has triggered a global shockwave from economists fearing the independence of the world’s most powerful central bank is openly on the line.

“I haven’t always agreed with Powell’s judgement — including the aftermath of the pandemic — but I’d be vastly more concerned about a scenario in which the administration of the day is calling the shots on monetary policy,” said Derek Holt, vice-president and head of Capital Markets Economics at Bank of Nova Scotia in a written note.

On Jan. 9 at the end of the day, the Canadian dollar was worth about USD 71.90 cents, and as of publication just before 4 p.m. Eastern on Jan. 12, it’s worth about 72.10.

The Canadian dollar, like most other currencies worldwide, is priced in relation to the U.S. dollar because the latter is considered the most widely-used currency in the world.

A stronger loonie compared to the U.S. dollar means Canadian consumers may see some benefits — such as on the price of gasoline, imports from the U.S., and potentially some food prices — but could also see challenges for exporters.