USD: Trading range maintained - Commerzbank

Esther Reichelt, Analyst at Commerzbank notes that for the time being the trading range of 1.1700-1.2050 in EUR-USD is being maintained, but that could change soon as President Donald Trump announced in an interview that he is about to nominate a candidate for the position as Fed chair.

Key Quotes

“According to the White House the decision is to be taken before 3rd November. For now none of the top five candidates seems to have been completely ruled out. In his interview Trump named John Taylor, Jerome Powell and Janet Yellen but pointed out that there were other candidates. However, this selection alone demonstrates that the decision on the Fed chair candidate can become a dominant driver for the dollar. While Powell and above all Yellen are seen as representatives of the status quo by the market, Taylor is seen as a supporter of rule-based monetary policy, which in the current environment would point to notably higher key rates.”

“A decision in favour of Taylor (or the similarly hawkish Kevin Warsh) would change market expectations towards a more aggressive tightening of Fed monetary policy, thus causing the dollar to appreciate. That means the dollar is facing a seismic decision over the coming two weeks - only that unfortunately we are not entirely certain when.”