Lael Brainard, Fed Governor and also a leading candidate for the job, will serve as Vice President, reported the White House.
The dollar index, which compares the greenback to a basket of six prominent currencies, rose 0.42% to 96.53 units, its highest since July 2020. The euro fell 0.58% to $ 1.1233, its lowest since the same date.
“Powell’s nomination for a second term suggests a less dovish outlook for monetary policy than under potential Brainard leadership,” said Joe Manimbo, a market analyst at Western Union Business Solutions in Washington. “There seems to be more room for rate hikes in the United States with Powell as Fed chairman, and that has been broadly positive for the dollar,” he added.
For its part, The euro also came under pressure as concerns mounted about new Covid-19 restrictions in Europe, with Austria entering another total lockdown and Germany evaluating doing the same.
“It has been a double blow for the euro. One has been an increase in cases across the bloc, which is reinforcing the decidedly cautious outlook on (European Central Bank) policy in stark contrast to the Fed, where pressure is mounting. for the US central bank to adopt a faster pace of normalization “Manimbo stated.
Powell y Brainard noted on Monday the corrosive impact that high inflation is having on the American economy and families, in what can be a a sign that controlling the rapid rise in prices is now the central bank’s top priority.
The Fed will publish the minutes of its November 2-3 meeting on Wednesday, which will be evaluated to detect new indications that it could accelerate the reduction of its bond purchases and raise interest rates earlier than expected.
Two-year U.S. Treasury yields rise to pandemic highs
US Treasury yields rose this Monday after Biden announced that he would nominate Jerome Powell for a second term at the helm of the Federal Reserve.
The return on two-year Treasuries, which normally moves in line with interest rate expectations, it rose slightly over 0.58%, its highest level since the beginning of March 2020, and following a weak auction of $ 58 billion of debt, according to DRW Trading analyst Lou Brien.
The Treasury also auctioned $ 59 billion in five-year papers in an operation that Brien considered “less than good”, with a large participation of the primary operators.
Rising short-term yields suggest that the market is anticipating a more aggressive reduction in asset purchases by the Fed in 2022, said Ian Lyngen, head of US Rate Strategy at BMO Capital Markets.
Powell’s nomination “It certainly puts a hike (of interest rate hikes) on the table earlier”, said.
The yield on 10-year Treasury notes gained 7.7 basis points to 1.613%, while the 30-year return rose 5.8 basis points to 1.965%.
In addition, the spread between the five-year and 30-year Treasuries fell to its lowest level since March 2020.
Source From: Ambito
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