Speculation on next Fed chair rife – Waller to be 'bearish' for USD

Matthew Ryan, CFA Ebury

Speculation remains rife as to who will be the next chair of the Federal Reserve.

Speaking yesterday, President Trump said that he had whittled his list of candidates down to four, of which we have confirmation of two: Kevin Warsh and Kevin Hassett - Chris Waller and David Malpass are reportedly the other two, while Treasury Secretary Scott Bessent is not in the running.

According to Polymarket, it is currently a very close race between Warsh (35%) and Hassett (32%), with Waller (20%) somewhat of an outsider. From what we can ascertain, Warsh seems to be the most hawkish of the three, while Waller is clearly the most dovish, having dissented at the last FOMC meeting, so any shift in the odds towards the latter would likely be bearish for the dollar.

Meanwhile, economic data out of the US was mixed on Tuesday.

The services PMI from ISM was revised down sharply to just 50.1 in July (from 51.5), although the equivalent index from S&P was actually bumped up to 55.7 (from 55.2).

It’s difficult to know which one to believe, although we will say that the latter tends to have a stronger correlation with actual data. Weekly jobless claims will be next up on Thursday afternoon.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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