Dollar Rises After Trump Nominates Warsh; Markets React

The U.S. dollar climbed on Monday, extending gains recorded at the end of last week after President Donald Trump announced Kevin Warsh as his nominee for Federal Reserve Chair. At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the currency against six major counterparts, rose 0.2% to 97.010, following a 1% jump on Friday.

Warsh’s nomination sparked immediate reactions in global markets. Precious metals and other risk-sensitive assets fell sharply, while the dollar recovered ground lost earlier in the week. Analysts highlight that although Warsh favors potential rate cuts, his criticism of the Fed’s balance sheet expansion suggests he may implement measures that tighten market liquidity.

“The dollar is showing renewed resilience,” ING analysts commented. “The correction following the Warsh nomination is helping to reverse last week’s depreciation, reflecting renewed investor confidence in U.S. monetary policy.”

Economic Data and Fed Policy Remain in Focus

Investors are preparing for a busy week with key economic indicators, including January’s manufacturing and services activity data. The spotlight will remain on the official monthly jobs report scheduled for Friday, which is projected to show a 67,000 increase in nonfarm payrolls and a steady unemployment rate of 4.4%.

Last week, the Federal Reserve held the federal funds rate steady after three consecutive 25-basis-point cuts, citing signs of stabilization in the labor market. “Policymakers are betting on stability, but a deterioration in labor data could push the Fed back toward additional cuts sooner than anticipated,” noted analysts from Payden & Rygel.

Global Currencies React to Dollar Movement

In Europe, EUR/USD remained stable near 1.1850, retreating from the recent 1.20 level. German retail sales rose 0.1% in December, and eurozone manufacturing activity improved, with HCOB PMI climbing to 49.5, edging closer to expansion territory. Analysts suggest the European Central Bank is likely to keep rates unchanged this week, while monitoring the euro’s recent gains.

In Asia, USD/JPY gained 0.2% to 155.00 after comments from Japanese Prime Minister Sanae Takaichi tempered expectations of imminent currency intervention. USD/CNY held steady at 6.9515, while AUD/USD dipped 0.2% to 0.6950 ahead of the Reserve Bank of Australia’s widely anticipated rate hike. Meanwhile, GBP/USD traded near 1.3790, with the Bank of England expected to maintain its current policy stance.

The dollar’s rebound, spurred by Warsh’s nomination and stable Fed policy, underscores investor focus on U.S. economic indicators and the outlook for global monetary trends.