President Trump has announced that he will make an announcement in early 2026, concerning the new Fed chairman.
During the last summer, an intense political battle was fought over the leadership of the venerable institution. From Lisa Cook’s appointment to Fed’s multibillion renovation, no stone was left unturned in the bid to change the central bank’s leadership. But to no avail.
Now, due to the passage of time, the president will finally get his pick of the next Fed chair. (As a reminder, Trump selected Powell as the Bank chief back in 2017.)
Kevin Hassett, director of National Economic Council, is reported to be the front runner for the job.
Immediately, the market is concerned. “Bond investors,” observed Financial Times in a catchy headline, “warned US Treasury over picking Kevin Hassett as Fed chair.” [1]
What exactly are investors anxious about? The biggest fear is this: the new Fed chair will be too dovish. US policy interest rates may plummet in the next few quarters due to ‘indiscriminate rate cuts’. This, in turn, means bond interests will shrink.
Already, the Dollar is feeling the impact of this jittery sentiment. See the Dollar’s Index chart below.
While a counter-trend rally took place in the last few months, prospects of a dovish monetary policy has capped its upside. A slippage below the short-term floor at 99.0 is noted. This is the first lower low since mid-September.
Against Sterling, the FX rate has rallied back above 1.330 to trade a four-week highs.
In sum, prospects of a lower US interest rates in the coming year are rising. Another market shift is on the table.
