Forex analytics. The dollar did not like Trump’s choice – ForexNews.PRO
The Hassett effect. Does it matter to the financial markets who exactly becomes the new Fed chairman? Judging by the fall in the US dollar in response to Bloomberg’s insider report on the imminent appointment of Kevin Hassett as head of the central bank, yes. The greenback remained remarkably stable against the background of an increase in the probability of a federal funds rate cut in December to 81%, but as soon as the chances rose to 85%, the EURUSD launched an attack.
The statement by Treasury Secretary Scott Bessent that Donald Trump will make the choice of the next Fed chairman by Christmas, coupled with the growing chances of the director of the National Economic Council to win, put a pig in the US dollar. Polymarket estimates the probability of Kevin Hassett’s victory at 57%, Kalshi – at 56%.
According to TJM Institutional Services, the central bank governor gets what he wants in the end. Unless there are compelling arguments to the contrary. Kevin Hassett’s words that he intends to serve his people and his president mean that the Fed will do with rates what Donald Trump wants. The desire of the owner of the White House has been known for a long time – to drop them to 1% in order to accelerate the economy. It doesn’t matter what happens to her after the expiration of her presidential term. At least there’s a flood after me!
If, before the rumors about the new Fed chairman, investors believed that the central bank would follow the path of “cut and hold,” then their opinion changed. The futures market lowered the end point of the federal funds rate movement to 2.75%. Let me remind you that the FOMC’s September forecast included 3.75%. Such a gap means that at one of the Committee’s meetings in 2026, there may be a 50bp cut at once. If the new head of the Federal Reserve is the same as Stephen Miran, this is not surprising.
The EURUSD rally was fueled by a series of weak reports on the US economy. Retail sales disappointed in September, U.S. consumer confidence collapsed to a 7-month low, and ADP reported a larger decline in private sector employment than in the previous reporting period. Coupled with the Hassett effect, this dropped the yield on 10-year Treasury bonds below 4% for the first time in almost a month and weakened the position of the US dollar.
Ultimately, the market’s view that the Fed would cut rates in December and then pause in January was overconfident. The central bank is data-dependent, and if statistics deteriorate, it will have no choice but to continue the cycle.
