Will New Fed Chair Shake up the Dollar?

Posted on

Market Drivers November 28, 2017
Dollar rebounds slightly
Dudley reiterates hike is coming
Nikkei 0.34% Dax 0.45%
Oil $57/bbl
Gold $1293/oz.

Europe and Asia:
No Data

North America:
USD Consumer Confidence 10:00
CAD Financial Review 10:30

It’s been a very quiet night of dealing in the FX markets with major hugging to 30-40 pip ranges in listless, news-free trade as the end of the month flows were the only driver of price movement in Asian and early European session.

The buck was slightly better bid as USDJPY pulled away from the 111.00 figure trading to a high of 111.38 in early London trade. The pair is trying to find some sort of bottom here ahead of the the key 110.00 level as markets try to ascertain Fed’s policy going forward.

Today the new Fed Chair will have his confirmation hearing in Congress and is expected to tell lawmakers that he expects the central bank to raise interest rates “somewhat further” and will consider ways “to ease regulatory burdens” on banks “while preserving core reforms.”

Since Mr. Powell is seen as a continuity appointment his hearing is unlikely to produce much volatility unless he assumes a decidedly more hawkish posture. If Mr. Powell minimizes the lack of inflation in the US economy and stresses the need for normalization, the dollar could take off like a banshee given the grossly oversold nature of the trade in USDJPY.

However, it’s unlikely that Mr. Powell will deviate from current Fed doctrine and will most likely maintain a relatively neutral tone for fear of causing confusion in the markets. Like Ms. Yellen, Mr. Powell appears to be a careful, considerate policymaker who seeks consensus and his style should not be a jolt to the market, but there is always a chance that he may want to assert his own presence on the FOMC, so any hint of such action could spark a rally in the buck.

Boris Schlossberg
Managing Director

Leave a Reply

Your email address will not be published. Required fields are marked *