- Congress is in no rush to confirm Warsh.
- Talks between the United States and Iran have failed.
The US dollar has launched a counteroffensive thanks to the failure of US-Iran talks and a 1.7% month-on-month increase in retail sales in March. The economy is strong, oil prices are high and could rise further, while the futures market is pricing in a 64% chance that the key rate will remain at 3.75% through the end of the year. This is even more true considering that Congress intends to put a stop to Federal Reserve Chairman nominee Kevin Warsh.
In his speech to lawmakers, Donald Trump's candidate stated that the Federal Reserve should focus on underlying inflation. Meanwhile, some trimmed indicators suggest that prices are approaching the 2% target, although they have not yet reached that level. The issue of the Federal Reserve's independence deserves special attention, and Kevin Warsh has promised to make interest rate decisions independently and has stated that the President has not asked him to cut rates.
The appointment of a new chairman of the Federal Reserve will depend on the judicial investigation into Jerome Powell. As long as this continues, Republicans are not willing to vote for him. The Kalshi Forecast Market estimates the chances of a change in the Fed chair by May 15 at 24% and 65% by June 30. As long as Powell remains in office, market expectations will lean towards a tighter policy stance, which will favor the US dollar.
continues to react to movements in oil and US indices. The rise and fall of the euro in response to the news that Iran had broken off negotiations with the United States forced the euro back. The president mitigated the negativity with a statement about extending the ceasefire indefinitely, which investors interpreted as a demonstration of TACO, or “Trump Always Chickens Out.”
At the same time, the Strait of Hormuz remains closed, threatening to cause a further rise in Brent prices and exacerbate the eurozone's problems. However, the fear of missing out has driven traders to the point of ignoring bad news. How long will this last?
The breakdown of talks between the United States and Iran, as well as the postponement of the expected rate hike by the Bank of Japan, have put the initiative back in the hands of the bulls. 80% of Bloomberg's 51 experts predict the Bank of Japan will remain stable in April. This contrasts with the March survey, when 37% of respondents expected monetary policy to be tightened at the next Governing Board meeting.
The FxPro Analyst Team
