Dollar Gains After Trump Picks Warsh as Fed Nominee
The US dollar rallied and the Treasury yield curve steepened after President Donald Trump nominated Kevin Warsh as the next Federal Reserve chairman. Warsh is seen as more hawkish than other candidates, prompting the market to immediately reprice interest rate expectations. Meanwhile, the Canadian dollar (loonie) weakened further after weaker-than-expected Canadian GDP data.
The Bloomberg Dollar Spot Index rose 0.5%, trimming its weekly decline to -0.8%. The dollar had previously been climbing from the Asian session through London due to speculation that Trump would choose Warsh. However, the dollar index is still trending downwards by around 1.7% throughout January, and month-end flows have also contributed to choppy price movements.
On the US data front, a separate release on Friday showed that the US PPI in December rose more than expected: final demand +0.5% month-on-month (expected +0.2%). This data provided additional ammunition for the dollar and yields.
Major currency pair movements:
The EUR/USD pair fell 0.7% to 1.1888. Interestingly, data also showed the eurozone economy grew better than expected at the end of last year—but the euro remained in a correction. Despite today's decline, the euro still gained 1.4% in January (its strongest since August).
The USD/JPY pair rose 1% to 154.70 (a daily high) and broke through the 100-DMA at 153.98. Monthly data from the Japanese Ministry of Finance confirmed that Japan did not intervene directly to strengthen the yen in the four weeks to January 28.
Tokyo inflation (excluding fresh food) eased to 2% year-on-year this month from 2.3% in December—a sign of somewhat subdued price pressures, which typically makes the BOJ's room for tightening feel more limited.
Source: newsmaker.id
