There goes those foundations
Markets whipsawed yesterday as the press published regarding POTUS’ intentions for the Fed Chair. CBS news kicked things off reporting Trump had asked a room of Republican lawmakers on Tuesday whether he should fire the Chairman of the Federal Reserve, Jay Powell. That report suggested Trump had indicated on Tuesday night that his intention was to follow out such a plan. Reuters and Bloomberg followed suit with the financial press suggesting a White House source claimed Trump had even drafted a letter intended to pave the way for Powell’s dismissal.
It wasn’t just US assets like Treasuries, the Dollar and US stocks that were hit. Global equities were impacted with the FTSE 100 closing in the red. The news that Trump was considering ousting the Fed Chair was therefore seen as a global negative risk event. The Dollar dropped by well over a cent versus the Euro and Pound in just a few minutes with gaps in pricing. However, just as quickly as markets had tumbled, they were to recover thanks to an immediate denial from the White House that such actions were underway. By this time UK and European indices had closed but futures prices pointed to a similar recovery as that underway amongst US indices.
The Dollar didn’t immediately return to recover its losses but overnight has continued to settle into the European open to retrace its range from earlier in yesterday’s session. Powell’s term is set to end on 15 May 2026 meaning it is not just threats to his specific Chairmanship that is creating risk in markets. Instead, it continues to be the threat of political interference in a central bank which is proving quick to spook markets. This news eclipsed the CPI and PPI data that has been released earlier this week. Today it will be the turn of retail sales data to be published before a key consumer sentiment survey tomorrow.
Discussion and Analysis by Charles Porter
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