Warsh Becomes the Preferred Favor—Why Did the Dollar Immediately Rise?
The US dollar strengthened alongside rising US bond yields after news emerged that Trump was preparing to nominate Kevin Warsh as the next Fed Chair—although the nomination is said to be unconfirmed until the official announcement.
This strengthening occurred because the market perceived Warsh as being more hawkish (tighter on inflation) than candidates considered more dovish. This means that if Warsh were elected, the chances of interest rate cuts would be fewer or slower—and that typically supports the dollar.
The market signals were clear: the dollar rose against major currencies, while the 10-year US yield also rose several basis points. This suggests investors immediately shifted positions as the “Warsh favorite” narrative took hold.
In “prediction markets,” Warsh’s odds rose sharply—even reaching above 80%–90% on Polymarket—while support for other candidates like Rick Rieder declined. This further strengthened market confidence that Trump’s announcement would likely favor Warsh.
Warsh himself is a former Fed governor (2006–2011) and was a strong candidate in 2017 before Trump chose Powell. If elected and passed the Senate, he would replace Powell, whose term as chairman ends in May.
All of this comes amidst larger concerns: markets are already sensitive to unpredictable US policy, large deficits, and issues of central bank independence. Trump also signaled a preference for a weak dollar, then Treasury Secretary Scott Bessent emphasized a "strong dollar policy"—this mix of signals causes the market to react quickly.
The bottom line: as soon as Warsh's chances rose, the market immediately priced in a tighter policy scenario, boosting the dollar and yields. But volatility remained high until Trump officially named him. (asd)
Source: Newsmaker.id
