While everyone awaits further developments in the Middle East, it's worth saying a few words about yesterday's Senate appearance by Kevin Warsh, the nominee for the Federal Reserve chair. His speech left no doubt about his independent stance.
By declaring he will not be a "puppet" of Donald Trump, Kevin Warsh demonstrated a commitment to monetary independence—an especially important stance in today's political environment. His emphasis on the interest rate as the "dominant force" in the Fed's toolkit underscores a traditional approach to economic management based on tried-and-true instruments.
Warsh said that rate cuts would benefit a "broader range of people," which can be interpreted as an aim toward more inclusive economic growth. At the same time, he indicated a preference for reducing the Fed's balance sheet, favoring interest rate policy over operations in the government bond market. This suggests caution toward unconventional measures and a desire to return to more predictable policy mechanisms.
Warsh voiced particular concern about gasoline prices, which he said are "moving in the wrong direction" and forcing Americans to suffer. That statement highlights his focus on the real economy and its impact on living standards. Despite these challenges, he believes that "the economy still has room to grow," a hopeful note that suggests potential for improvement.
An important element of his program is the proposal for the Fed to cooperate with the government not only on monetary policy. This could indicate a willingness to coordinate efforts across a broader range of economic issues. Finally, his call for a "new system to fight persistent inflation" acknowledges the complexity of the current geopolitical environment and a readiness to seek innovative solutions to stabilize prices.
The currency market received the remarks from the prospective Fed chair rather coolly. The dollar may get some support, but most of that support has come from strong US fundamental data.
EUR/USD
Buyers now need to take 1.1760 to target 1.1790. From there, a move to 1.1822 is possible, but achieving that without support from major players would be difficult. The far target is 1.1855. On a decline, buyers are expected around 1.1720; a fall below that could quickly push EUR/USD toward 1.1680. The lowest downside target would be around 1.1650 (opening long positions from 1.1650 was suggested if no buyers appear at 1.1720 or after a new low at 1.1680).
GBP/USD
Pound buyers need to take the nearest resistance at 1.3530 to target 1.3565; breaking above that will be quite difficult, with a farther target at 1.3595. On a drop, bears will try to take control at 1.3505. If they succeed, a break of that range would deal a serious blow to bulls and push GBP/USD to 1.3473 with a prospect of moving to 1.3450.
