Well, this shouldn’t come as a surprise but Donald Trump is reportedly leaning towards Jerome Powell for the Fed chair.
Just hours after Janet Yellen left the White House, Politico reported that Powell is the leading candidate. That’s according to an official who “cautioned that Trump has not made a final decision.”
You’ll recall that Powell is said to be Steve Mnuchin’s favorite. This is a dovish sign for markets and that was immediately reflected in the dollar and yields as the news crossed:
As Bloomberg notes, UST futures volumes surged on the news, with ~85k contracts trading over a 1- minute period in sharp move from 125-05+ to 125-14; 10Y yields dropped back through 2.31%.
Here’s more from Politico:
Of the five finalists, Powell would likely face the least opposition to confirmation in the Senate, according to interviews with nearly a dozen members of the Banking Committee.
That is not to say he is the most popular choice among all the senators, but he has the benefit of being a Republican with private sector experience — a pull for GOP lawmakers — and a current member of the Fed board who has voted with Yellen on monetary policy decisions and post-crisis financial rules, a point in his favor with Democrats.
Betting odds now show Powell as the overwhelming favorite:
Kevin Warsh is a distant second, but at this point, it seems abundantly clear that someone has told Trump that Warsh would likely usher in an unceremonious end to the President’s beloved stock market rally.
John Taylor – who everyone was talking about just days ago – has been all but priced out.
For those in need of a refresher on the market implications, here’s Deutsche Bank’s handy guide: