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  • richard evans

Vacancies at the Fed

Good morning

Feds Quarles resign with effect from end 2021, while Claridas term ends in January so there are two vacancies up for grabs, but remember that Fed chairman Powell’s term also ends in early 2022, so by Feb or March next year we could see a rather different set of people. Whether Powell gets re-elected remains to be seen, it seems the most stable course of action but there will be pressure from those who think change is necessary. Brainard, a known dove, looks to be in the running as a replacement after having been interviewed by Biden recently, although still something of an outside bet.

Meanwhile Feds Bullard was fairly hawkish as he said 2022 GDP likely to be 4% and with a hot labour market he sees the chance of two rate rises through 2022, plus the potential to end asset purchases earlier than currently planned. His view is not shared with Evans, who still sees no rate rise in 2022 while Harker sits in the middle saying simply no rate move until tapering ends.

Of perhaps more interest than the usual rate move comments is the Feds warning that asset prices remain vulnerable to any decline in risk sentiment, and the risks posed to the global economy by the China real estate crisis. These risks run alongside the ongoing issues of Covid and the possibility of hard winter if vaccinations and boosters are not taken up or do not prove to be as effective as hoped.

BoEs Bailey helped GBP recover some recent losses by saying rates could be raised if it appears inflation pushes wages higher. They are eager to ensure higher inflation does not cause a widespread increase across the economy. GBP actually had a decent day yesterday, with GBPUSD trading up from 1.3450 lows to reach 1.3580, while EURGBP trades down to 0.8540 (GBPEUR 1.1710). EUR struggled as ECBs Lane made it clear again that any monetary tightening would be counterproductive, while Lagarde reiterated the view that inflation is transitory. German ZEW today not expected to help EUR either. EURUSD 1.1585 as I type, having tried and failed to hold above 1.1600 earlier this morning.

Powell, Lagarde and Bailey all speak today which makes the calendar look interesting but none are scheduled to talk on the economy so although we will wait patiently, this may be something of a non-event. Of more interest is US inflation data due tomorrow afternoon, we will also see inflation readings from China and Germany in the early hours of tomorrow morning.

I was looking at Elon Musks latest sideshow, his Twitter poll over whether he should sell some of Teslas shares. The poll result saw nearly 60% of the 3.5 million voters agree he should sell his shares in order to pay some tax. The timing must have been planned and could not really have been better for Mr Musk, with the shares around all-time highs at the time of the vote. OK, so prices dropped after the result but assuming Musk does adhere to the vote he’ll be selling shares near the highs. A pretty clever way of unloading some stock without spooking the markets ort shareholders.

- 10.00 German ZEW

- 13.00 ECBs Lagarde speaks

- 13.30 US PPI

- 14.00 Feds Powell speaks

- 16.00 BoEs Bailey speaks

- 17.10 BoCs Beaudry speaks

- 22.45 BoCs Macklem speaks

- 23.30 AUS Westpac consumer confidence

- 01.30 China CPI

- 07.00 German CPI, HICP

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