May 15 – Kevin Warsh officially assumes the role of Federal Reserve Chair today, May 15, succeeding Jerome Powell, whose term concludes. Warsh, often controversially labeled as a proxy for former President Trump, marks a leadership transition at the central bank. Notably, there is no indication that Warsh will deliver a formal public address upon taking office, unlike the tradition for a U.S. President entering the White House.
Around 2:00 AM Beijing Time on May 14, the U.S. Senate confirmed Kevin Warsh's nomination as Fed Chair with a 54 to 45 vote. This followed the Senate's approval on May 12 of his nomination as a Federal Reserve Board Governor for a 14-year term. With the Board fixed at seven members, the appointment of Warsh prompted the immediate resignation of incumbent Governor Milan.
While no specific schedule has been announced, market participants should closely monitor the Federal Reserve's official website today for potential releases, such as an inaugural statement or brief video remarks from Chair Warsh. Any content touching on monetary policy or future policy inclinations could significantly impact the U.S. dollar and U.S. stock markets.
The chart above depicts the intraday movement of the U.S. 10-year Treasury yield. Evidently, driven by expectations surrounding Warsh's ascension to the Fed Chairmanship, bond yields have been on a sustained upward trajectory, currently quoted around 4.532%. Although Warsh is perceived as aligned with Trump, to uphold the Federal Reserve's independence, he may be compelled to adopt monetary policies more in line with market expectations. The persistent rise in U.S. Treasury yields itself contradicts market speculation that a "Warsh-led Fed would immediately embark on accommodative monetary policy."
Regarding market performance, from Tuesday to Thursday, EUR/USD exhibited a clear downtrend on an hourly chart, declining from a high of 1.1780 to approximately 1.1643 by 13:00 Beijing Time on Friday, a drop of 137 basis points. On an hourly scale, a 137-basis-point move is substantial, indicating that market concerns over high U.S. inflation are already manifesting in price action, reflecting heightened expectations for Fed rate hikes. If Chair Warsh does not issue any public statements or remarks today, the hourly downtrend in EUR/USD is likely to persist. Should any communication emerge, close attention to its tone and policy leanings is crucial to navigate potential market reversals.
Comments