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The dollar barely budged after Trump crowned Jerome Powell as next Fed head as traders appeared to focus on the uncertainty surrounding the tax plan.

Meanwhile, the pound continued to slide after the BOE announced a “dovish hike” and signaled a slower pace of tightening from here.

  • U.S. initial jobless claims at 229K vs. 235K forecast
  • U.S. preliminary non-farm productivity up 3.0% vs. 2.5% consensus
  • U.S. preliminary unit labor costs up 0.5% as expected, 0.2% previous
  • Trump announced Powell as next Fed Chairperson, no Vice Chair yet
  • Powell: Committed to serving Fed dual mandate
  • Powell: Economy has made substantial progress

Major Events/Reports:

Powell as next in line for Fed throne

It’s official! U.S. President Trump named current Fed official Jerome Powell as the next head of the central bank to succeed Yellen when her term expires in February next year.

The White House clarified that the Donald doesn’t have any problems with Yellen but that he was most comfortable with Powell. After all, Powell does share a lot of similar views with Trump when it comes to financial deregulation.

There has been no announcement yet on Powell’s second-in-command but he is still widely expected to bring some continuity in policymaking. In his speech, he acknowledged that the economy has made substantial progress and that the financial system is more resilient than before.

Powell also said that he is committed to the Fed’s twin mandate of full employment and 2% inflation.

Republican tax plan jitters

Market participants seem to have split views on the draft of the tax plan from the Republican party, keeping a lid on the dollar’s gains as many doubted that it would pass Congress or if it would even be feasible at all.

The plan called for slashing the corporate tax rate from 35% to 20% and reducing the number of tax brackets for individuals as often shared by the Donald in his speeches.

Under this tax plan, the standard deduction would be doubled and it would repeal the alternative minimum tax. It would impose new corporate tax limits on deductions for executive compensation and a new tax on university endowments.

The draft included reductions to renewable energy tax credits crucial for projects related to wind power. Republicans also proposed eliminating the $7,500 tax credit for electric vehicles.

Wall Street had a mixed reaction to the tax plan as traders were also busy listening in to Facebook’s earnings call:

  • Dow 30 index is up 81.25 points to 23,516.26 (+0.35%)
  • S&P 500 index is up 0.49 points to 2,579.85 (+0.02%)
  • Nasdaq is down 1.59 points to 6,714.94 (-0.02%)

Major Market Mover(s):


Pound bears were enjoying the afterparty of the dovish BOE hike as there were still a couple of dissenters and the central bank emphasized that they’re not eager to hike again.

GBP/USD fell from a high of 1.3234 to a low of 1.3058, GBP/JPY is down from 151.49 to the 149.00 handle, EUR/GBP popped up to .8927, and GBP/CAD is down to 1.6730.

Commodity currencies

The comdolls still managed to score some gains for the day, taking advantage of weakness in the dollar and sterling.

AUD/USD is up to .7715, NZD/USD rallied to .6913, USD/CAD is down to 1.2810, AUD/JPY is up to the 88.00 mark, and GBP/NZD has tumbled below the 1.9000 handle.

Watch Out For:

  • Japanese banks closed for the holiday
  • 1:30 am GMT: Australian retail sales m/m (+0.4% expected, -0.6% previous)
  • 2:45 am GMT: Chinese Caixin services PMI (increase from 50.6 to 50.8 expected)