Key events
If Kevin Warsh is nominated as the next Fed chair, it could lower the risks of another major drop in the dollar, ING analysts suggest:
The dollar has been waiting for a catalyst for a recovery, and the news that Kevin Warsh is likely to be announced as the new Federal Reserve Chair nominee today offers exactly that.
Warsh has been amongst the most market-friendly candidates, as he is a former Fed governor with a history of hawkish views, especially on balance sheet reduction.
Given how adamant Trump has been on reducing rates, it’s safe to assume Warsh has taken a more dovish stance during the interview process – but this pick may suggest a desire to calm speculation on Fed independence loss.
The London stock market has opened slightly lower, as investors anticipate the nomination of Kevin Warsh as the next Federal Reserve chair.
The FTSE 100 share index is down 16 points, or 0.17%, at 10,155 points.
Gold producer Fresnillo is leading the fallers, down 4.8%, tracking the drop in the gold price this morning.
Mining stocks are also down, reflecting expectations that Warsh is less dovish than some rival candidates, leading to a relatively stronger dollar (which pushes down commodity prices).
Kevin Warsh is currently the Shepard Family Distinguished Visiting Fellow in Economics at Stanford University’s Hoover Institution, and Dean’s Visiting Scholar at Stanford Graduate School of Business.
According to Stanford he advises several private and public companies, including serving on the board of directors of UPS. In addition, he is a member of the Group of Thirty.
Before serving on the Federal Reserve’s Board of Governors from 2006 until 2011, he was executive secretary of the White House National Economic Council and also worked for the M&A department at Morgan Stanley.
Susannah Streeter, chief investment strategist at Wealth Club, says:
Kevin Warsh is believed to be Trump’s anointed successor at the Fed, with a decision expected to be announced later.
He’s a former Fed governor, and while he did have a reputation as being an advocate of tighter monetary policy, earning the ‘hawk’ moniker, he’s recently been publicly advocating for a fresh cut in interest rates, aligned with Trump’s thinking. However, his experience and past attitude imply he’s likely to hold the line if sharp inflationary pressures return.
Warsh for the Fed? What the experts say
Kathleen Brooks, research director at XTB:
The market will also find out who the next Fed chair will be at some point on Friday. The favourite is now said to be Kevin Warsh, who was a former Fed governor between 2006 – 2011. Back then, he was a renowned hawk, however, he has recently aligned himself with President Trump and called for lower interest rates. He was also in favour of shrinking the Fed’s balance sheet when he was on the FOMC, which the Fed recently stopped. This is an interesting pick from the President and may give the market some hope that Fed independence will be preserved by elevating a former Fed insider. US Treasury yields are higher in early trading, as the market focuses on Warsh’s hawkish past.
It is worth noting that the nominee could face a complicated path to getting confirmed by the Senate, after both Democrats and Republicans have called for Fed independence to be maintained over the will of the President.
Aaron Hill, chief market analyst at FP MARKETS:
For some, it is curious that Warsh is now the frontrunner given his hawkish history. So, why is Warsh now seen as the top pick? I believe a few things have driven his ascent.
This includes a recent visit to the White House, hints from Trump that his selection will not be ‘too surprising’, Warsh’s recent ‘alignment’ with Trump’s policies – in part because he expects AI to bolster productivity – and his selection offering the markets some credibility.
Stephen Innes, managing partner at SPI Asset Management:
Warsh is not a promise of fast cuts. He is a promise of process. The signal here is not dovish or hawkish in the cartoon sense. It is institutional. It says the Fed remains a central bank, not a policy shortcut. That is why the dollar firmed first. Not because rates are going higher forever, but because the odds of a policy accident just went down.
Think of Warsh as a ballast appointment. He is there to steady the hull, not to goose the engine. That means rate cuts are still coming eventually, but only after the data clears the bar. Inflation must behave. Financial conditions must justify it. The Fed is not being handed a stopwatch and told to sprint.
Michael Brown, senior research strategist at brokerage Pepperstone:
It seems set that former Fed Governor Kevin Warsh will be formally announced as Trump’s pick for Fed Chair today. Trump’s picking the worst of the four on his shortlist here in my view. Warsh been a monetary hawk for his entire career, even advocating an end to QE in the midst of the GFC, when the labour market was being wrecked, due to perceived worries about inflation. That’s before this nonsensical idea that you can lower rates by shrinking the balance sheet. Conveniently, he became an uber-dove in November 2024, just in time to position himself for the job that he’s always wanted as a perennial ‘nearly man’ until now.
His dovishness stems not from data, but from political expediency. Trump seems to have been duped by Warsh’s recent rhetoric, and the latter’s true hawkish colours will probably return once he’s on the Board. Still, he’s only one vote, and as with all the candidates for the top job shan’t be able to force the Committee in any direction unless there’s a cogent and logical argument in favour of a particular policy action.
Dollar up, gold down
The US dollar has strengthened following reports that Kevin Warsh will be nominated as the next Fed chair, while precious metals prices have fallen.
The dollar index has risen by 0.35% this morning, with gains against the British pound and the euro.
That indicates that Warsh is being seen as a relatively hawkish choice, compared to the other candidates on the slate.
Sonu Varghese, global macro strategist at Carson Group in Chicago, says:
“If the nominee is indeed Warsh, we could actually end up with a Fed that tilts hawkish at the margin.”
Gold, though, is down 4% at $5,168 an ounce. Yesterday it soared to a record high of almost $5,600/oz before dropping in volatile trading.
Warsh now a 93% chance on Polymarket
The odds of Kevin Warsh being nominated as the next chair of the Federal Reserve have collapsed, as punters have piled in.
Warsh is now a 93% chance of getting the nod from Donald Trump, according to predictions site Polymarket.
That’s up from 32% at the start of the week, when BlackRock fixed income chief Rick Rieder was briefly the front-runner.
FT: It’s Kevin Warsh
The Financial Times have nailed their trousers to the mast, declaring that Donald Trump is preparing to nominate former Federal Reserve governor Kevin Warsh to replace Jay Powell as Fed chair, citing three sources.
They write:
Warsh — who was the youngest Fed governor ever when he joined the central bank in 2006 — is known for his connections on Wall Street and in Washington policymaking circles.
While he has a long-standing relationship with the president, some viewed his hawkish stance during his time at the Fed as a big obstacle to winning Trump’s trust.
Warsh, who has advocated for “regime change” at the central bank, has said the Fed should reduce the size of its vast balance sheet — something Treasury secretary Scott Bessent also supports.
Trump to name his pick as Fed chair today
The identity of the next person to run America’s central bank – and face firm pressure from Donald Trump to cut interest rates – could be revealed today.
President Trump told reporters last night that he would announce a successor to Federal Reserve Chair Jerome Powell on Friday morning
Trump hinted that it would be “somebody that could have been there a few years ago … I think it’s going to be a very good choice. I hope so.”
A source later told Reuters that Trump had met with former Fed Governor Kevin Warsh at the White House on Thursday.
Warsh, who interviewed for the job in 2017, is a critic of the Fed, which he says needs “regime change” to regain lost credibility.
Whoever Trump picks will needs to be confirmed by a Senate majority.
Introduction: Eurozone GDP day begins with French slowdown
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It’s eurozone GDP day, when we discover how the European single currency bloc’s economies are faring.
And France has got the festivities off to a modest start, with data showing it grew by 0.2% in October-December.
That’s down from 0.5% in the third quarter of last year, and in line with forecasts.
Statistics body INSEE reports that:
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French final domestic demand slowed down slightly.
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Investment also slowed, but household consumption accelerated moderately (up to +0.3% after +0.1%).
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Foreign trade made another positive contribution to growth in the fourth quarter. Exports slowed down significantly (+0.9%, down fromr +3.2%), while imports fell back sharply (-1.7% after +1.5%).
And for the year, the euro zone’s second-biggest economy grew 0.9% over the course of 2025, a faster pace than the 0.7% expected by the government.
The agenda
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6.30am GMT: France Q4 2025 GDP report
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8am GMT: Spain Q4 2025 GDP report
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9am GMT: German Q4 2025 GDP report
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9am GMT: Italy Q4 2025 GDP report
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10am GMT: Eurozone Q4 2025 GDP report
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1.30pm GMT: Canada’s November GDP report
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1.30pm GMT: US PPI (producer price inflation) data for December
