FED: Trump Administration Appears To Be Mulling Board Options
Jun-30 17:28
Treasury Secretary Bessent reiterated in a Bloomberg TV appearance Monday that the Trump administration's replacement for Gov Kugler's term expiring in January 2026 could eventually become the Fed Chair.
- Asked "Is a new appointee supposed to be considered [a] shadow Fed Chair?" Bessent said: "Not necessarily. We will see. The 14-year seat is opening up in January, so we have given thought to the idea that perhaps that person would go on to become the Chair when Jay Powell leaves in May, or we could appoint the new Chair in May. That is just a two-year seat." Asked if he thinks there could be confusion, Bessent says "I do not see why there would be confusion. There are people who are currently at the Fed who are under consideration, so why would there be confusion if you add another candidate in January?"
- Federal Reserve Board seats have 14-year terms. Gov Kugler was appointed in September 2023 to an unexpired term that ends in January 2026 (and it's clear she won't be re-appointed). So her replacement will have a term ending in 2040.
- Powell's term as Chair expires in May 2026. However his term as a Board Member isn't over until January 2028, so he can stay on until then even after being replaced as Chair. (Bessent said in another appearance last week: "Chair Powell doesn’t have to leave — he could stay on the board, not as Chair.")
- It's unclear whether Powell will stay on for his full Board term, which is what Bessent appears to refer to here when saying it is "just a two-year seat".
- The White House could appoint a) a current Board member, as Bessent says is possible (this implies Waller or, less likely, Bowman), b) a new Board member appointed to replace Kugler in January, or c) a new Board member appointed to replace Powell if he steps down in May. If c), the new Fed chair would have a 4-year term as Chair, but theoretically would have to be reappointed to a Board seat in January 2028 to continue as Chair.
- Overall Bessent's comments in the last few days appear to suggest that the White House hasn't made up its mind on who will be Powell's eventual replacement or even the board appointment strategy ahead. Overall the White House has pushed back on the notion that they could name a Chair in the coming months, contrary to some speculation and a WSJ report last week.
- Waller, Kevin Warsh, Kevin Hassett, and Bessent himself are widely considered to be the front-runners for Powell's position.
- Note President Trump later on Monday criticized the "entire Board" for not cutting rates, seemingly the first time he's expanded his criticism beyond Powell. The next Board seat term expiries are Waller (2030), Barr (2032) and Bowman (2034) - Trump appointed Waller and Bowman in his first term. Jefferson is in until 2036 and Cook until 2038.
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AUSSIE 10-YEAR TECHS: (M5) Bear Cycle Remains Intact For Now
May-30 22:15
- RES 3: 96.501 - 76.4% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 2: 96.207 - 61.8% of the Mar 14 - Nov 1 ‘23 bear leg
- RES 1: 95.960 - High Apr 7
- PRICE: 95.745 @ 14:57 BST May 30
- SUP 1: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 2: 95.275 - Low Nov 14 (cont) and a key support
- SUP 3: 94.707 - 1.0% 10-dma envelope
Aussie 10-yr futures rallied well on the RBA rate decision last week, reversing a small part of recent weakness. Recent price action pressured prices through to new pullback lows last week. Next support undercuts at 95.420 (pierced), the Feb 13 low, ahead of 95.275, the Nov 14 low and a key support. Clearance of this level would strengthen a bearish condition. To the upside, a recovery of recent losses would shift attention to resistance at 96.207, a Fibonacci retracement point.
US-JAPAN: Trump To Deliver Remarks On Nippon Steel-US Steel Deal Shortly
May-30 21:01
US President Donald Trump is shortly due to deliver remarks in Pittsburgh, Pennsylvania, where he is expected to endorse Nippon Steel's takeover of US Steel. LIVESTREAM The announcement comes as the US and Japan remain far apart on a new bilateral trade deal.
- Trump said in a Truth Social message on May 23 that the planned partnership "will create at least 70,000 jobs, and add $14 Billion Dollars to the U.S. Economy," over the next 14 months.
- Semafor writes: “The US government will get a “golden share” in US Steel …, with the power to determine who sits on the board and control over production levels. It’s a dramatic provision that could lay out a roadmap for how deals get done in the Trump administration.”
- Japanese Prime Minister Shigeru Ishiba yesterday “expressed determination today to defend rules-based, free and multilateral trade systems and work on expanding the main Asia-Pacific trade group”, per AP.
- Ishiba said: “High tariffs will not bring economic prosperity. A prosperity built on sacrifices by someone or another country will not make a strong economy.”
- AP notes: “His comment comes as Japan’s chief tariff negotiator Ryosei Akazawa travels to Washington, D.C., for a fourth round of talks aiming to convince the U.S. to drop all recent tariff measures. So far Japan has not been successful in gaining U.S. concessions and is reportedly considering purchases of more U.S. farm products and defense equipment as bargaining chips.”
- Ishiba said after a call with Trump yesterday, “[we now] deeper understanding about each other,” but noted to reporters there has been no change to Japan’s position on the tariffs.
MACRO OUTLOOK: MNI US Macro Weekly: Jury’s Still Out On Q2 Downturn
May-30 20:51
We've just published our US Macro Weekly - Download Full Report Here
While the past week may be remembered for court decisions suspending the majority of the White House’s tariffs, it also brought further data evidence that the US economy did not fall off a cliff at the start of Q2.
- Consumer surveys (UMichigan, Conference Board) showed a downtick in consumer inflation expectations and improved sentiment, reflecting the US-China trade de-escalation on May 12.
- And while updated GDP data showed downwardly revised Q1 domestic demand, April personal consumption slowed but remained positive as underlying income growth remained solid.
- Likewise, though core durable goods orders retreated from Q1, a clear dropoff at the start of Q2 was not in full evidence. Regional Fed surveys signaled that activity stabilized in April-May, albeit at relatively weak levels, and labor market data pointed to incremental rather than sharp weakness.
- The point was underlined by the Atlanta Fed's nowcast for Q2 GDP growth which jumped to 3.84% on Friday from 2.18% in its May 27 update. Even if dramatic upgrade was due to a lower trade deficit in April as tariff front-running reversed, final domestic demand is still expected to be robust overall.
- Of course, things can change quickly: note Friday’s apparent re-escalation in US-China trade tensions and the temporary nature of the judicial tariff freeze (which in any case looks to be circumvented by the Trump administration), as well as the July “reciprocal” tariff negotiation deadline continuing to loom large.
- For the moment though, while uncertainty looks to be a constant, the data aren’t (yet) showing the degree of deterioration that had until recently been feared.
- Next week’s data highlights include key checkpoints for May, including ISM Manufacturing and Services surveys (which look likely to show some recovery versus April) and the US Employment report.
- Nonfarm payrolls growth is expected to moderate in May after a surprisingly robust 177k in April, with consensus currently around the 130k mark. The unemployment rate meanwhile is seen holding at 4.2% for what would be a third consecutive month.
