The nomination of Jerome Powell as next Federal Reserve Chairman came as no surprise. The US dollar barely reacted to the news. The US Dollar Index treaded water within its weekly range, between 94.4 and 95. Donald Trump definitely made the choice of stability and continuity by choosing the New York republican Fed President. The USD edged slightly lower after the announcement as investors discounted completely the risk that a more hawkish candidate will replace Yellen. Similarly, US yields lost some ground yesterday, especially on the long-end of the curve. The 10-year eased to 2.35%, while the 30-year returned to 2.83%.
Today is NFP Friday and we’ll likely get some action following last month’s disappointing reading. NonFarm payrolls are expected to come in at 313k in October after contracting 33k in September. As usual, investors will pay a close attention to wage growth with average hourly earnings anticipated to rise 2.7%y/y versus 2.9% in September. The release of the September job report will be our best and last shot to get some volatility this week. Unfortunately, the market is more focus on developments on Trump’s Tax plan, as it will have a larger impact on inflation and growth, should it be approved. In addition, investors realized that a stronger job market do not ensure, at all, sustained inflation pressures.
By Arnaud Masset