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Yahoo
9 minutes ago
- Yahoo
Dollar drifts as investors ponder Fed independence ahead of Powell speech
By Ankur Banerjee SINGAPORE (Reuters) -The U.S. dollar drifted on Thursday as investors fretted about the Federal Reserve's independence after yet another attack from President Donald Trump ahead of remarks from Chair Jerome Powell later this week that could influence the outlook for rates. Trump called on Fed Governor Lisa Cook to resign on the basis of allegations made by one of his political allies about mortgages she holds in Michigan and Georgia, intensifying his effort to gain influence over the U.S. central bank. Cook said she had "no intention of being bullied to step down" from her position at the central bank. Trump has also told aides he is considering trying to fire Cook, the Wall Street Journal reported on Wednesday. "It has the potential to raise questions around the Fed's oversight and regulatory functions but it has little to no near-term monetary policy implications," said Prashant Newnaha, senior Asia-Pacific rates strategist at TD Securities. That explained the relatively muted reaction in the currency markets to the news as the dollar initially dipped on the news but was mostly calm into the Asian session. The Japanese yen held onto gains made in previous sessions and was little changed at 147.41 per dollar, while the euro was steady at $1.1642. Sterling last fetched $1.34535. That left the dollar index, which measures the U.S. currency against six other peers, steady at 98.301. Trump has repeatedly criticised Powell for being too slow to cut rates, stoking investor worries about the central bank's independence and its credibility. Investors expect Trump will replace Powell with a more dovish appointment when his term ends in May. Trump earlier this month said he would nominate Council of Economic Advisers Chairman Stephen Miran to serve out the final few months of a vacant Fed seat after Adriana Kugler unexpectedly resigned. Kristina Clifton, a senior economist at the Commonwealth Bank of Australia in Sydney, said if Cook resigns it would create another opening for Trump to appoint a Fed Governor who will vote to lower interest rates. "Perceived political interference in the Federal Reserve can undermine its independence, steepening the yield curve and denting the USD's safe haven status." POWELL SPEECH The main focus this week has been on whether Powell will push back against market expectations for a rate cut at the Fed's September 16-17 meeting when he speaks on Friday at the Jackson Hole meeting, following a weak jobs report for July. "Markets are adamant that recent labour market data necessitates some policy calibration and are expecting Chair Powell to tip his hat in that direction," TD's Newnaha said. Traders are pricing in an 82% chance of a 25-basis-point rate cut next month, CME FedWatch tool showed. While the odds have lowered from last week after hotter than expected producer price inflation tempered expectations, investors are still pricing in over 50 bps of easing this year. Some analysts cautioned that markets could end up being disappointed by Powell's speech, noting that the impact of Trump's tariffs on inflation remains uncertain. "It is not clear that Powell will deliver strong guidance," said Benoit Anne, managing director in the investment solutions group at MFS Investment Management. If the dovish signals elude us, there will be significant pricing out of the odds for a September cut." In other currencies, the New Zealand dollar was nursing steep overnight losses at $0.58205 after diving 1.2% to its lowest level since April. New Zealand's central bank cut interest rates on Wednesday as expected but left the door wide open to yet more easing if needed. The Australian dollar eased 0.13% to $0.64245, hovering near a two-week low. [AUD/] Sign in to access your portfolio
Bloomberg
12 minutes ago
- Bloomberg
Taiwan $235 Billion Pension Avoids Hong Kong Firms for Mandates
One of Taiwan's largest pension funds has guided outside firms against using Hong Kong-registered entities to manage its money, according to people familiar with the matter, underscoring the geopolitical challenges facing the financial hub as it deepens ties with mainland China. The Bureau of Labor Funds, which manages about $235.2 billion, has been verbally asking third-party managers to exclude Hong Kong entities from its contracts since last year, the people said, asking not to be identified because the information is private.
Yahoo
32 minutes ago
- Yahoo
Options Traders Brace for Big Tech Selloff With ‘Disaster' Puts
(Bloomberg) -- Options traders are increasingly nervous about a plunge in technology stocks in the coming weeks and are grabbing insurance to protect themselves from a wipeout. The tech-heavy Nasdaq 100 Index is up almost 40% since its early April plunge triggered by President Donald Trump's sweeping tariffs. The rally has been propelled by big tech, with the Bloomberg Magnificent 7 Index — which contains the likes of Nvidia Corp., Meta Platforms Inc. and Microsoft Corp. — soaring nearly 50% since its April 8 bottom. Chicago Schools Seeks $1 Billion of Short-Term Debt as Cash Gone A Photographer's Pipe Dream: Capturing New York's Vast Water System A London Apartment Tower With Echoes of Victorian Rail and Ancient Rome Why New York City Has a Fleet of New EVs From a Dead Carmaker Princeton Plans New Budget Cuts as Pressure From Trump Builds The concern, however, is that those gains are hiding areas of weakness lurking beneath the market's surface. And there are potential triggers for a drop coming up, from Federal Reserve's Jackson Hole symposium starting in a few days to Nvidia's earnings next week. Traders are 'less concerned' about a 'normal run-of-the-mill pullback' and seem to be more worried about a repeat of the April selloff, said Jeff Jacobson, head of derivative strategy at 22V Research Group, who thinks a shallower dip is more likely. Traders are buying 'disaster' puts on the Invesco QQQ Trust Series 1 ETF, which tracks the Nasdaq 100 Index, Jacobson said. Put options give investors the right to sell the underlying security at a certain price, and are popular as a way of protecting against a market drop. A measure showing the difference between the cost of hedging against a sharp downturn and a smaller one is at an almost three-year high, Jacobson said. Fears of a bubble are mounting, as tech stocks follow a pattern that is 'surprisingly similar' to the dot-com bubble of the late 1990s, Torsten Slok, chief economist at Apollo Management, wrote in a note to clients on Monday. Meanwhile, Michael Hartnett, chief investment strategist at Bank of America Corp., has been warning of a bubble forming in risk assets since December and predicts that US stocks will drop after the Fed's Jackson Hole symposium ends on Friday. Myriad Risks 'The market's had such a big run,' Jacobson said. 'A myriad of things' could send big tech tumbling. For example, there are worries about the impact of artificial intelligence on software companies, which has helped push Salesforce Inc.'s share price down 27% this year. And the Magnificent 7 rally could come to an end if tariff-driven inflation forces the Fed to curtail interest rate cuts that the market has already priced in. 'It could be a rotation out of those the Mag Seven names into some of the other areas that have lagged,' Jacobson said. 'It could be 'sell the news' when you have Nvidia earnings in the next few weeks. We could even get a 'sell the news' out of Jackson Hole.' The elevated put skew indicates that traders are hedging against a repeat of the tariff tantrum in April, according to Jacobson. He sees that fear as overblown. While the Nasdaq 100 sank more than 20% from its Feb. 9 high to its April 8 low, that kind of move is extremely unusual. Over the last 18 months, the average selloff in the Nasdaq 100 has been around 12.5%, Jacobson said. To bet on a correction in the ETF, Jacobson suggests a number of trades including buying a put ratio spread, in which cost of insuring against a shallower drop is partially funded by selling insurance against a deeper, April-style plunge. Specifically, Jacobson encourages traders to buy $570 puts in QQQ that expire on Oct. 17, and that they fund the trade by selling twice as many $515 puts in QQQ. The trade should make money if the index falls by roughly 2% and no more than 11%, he said. The $515 level is the ETF's 200-day moving average, which he believes will act as a floor in the event of a pullback. Not everyone on Wall Street is convinced that investors should be shorting the best performing of the major US equity indexes over the last decade. JPMorgan Chase & Co. cross-asset strategists, for instance, suggest shorting the small-capitalization Russell 2000 Index and going long the Nasdaq 100. Jacobson, however, is more pessimistic about big tech's immediate future. 'Clearly, there's a possibility, right?' he asked rhetorically. 'You have just a, such a strong concentration in these names. It wouldn't take much.' Foreigners Are Buying US Homes Again While Americans Get Sidelined What Declining Cardboard Box Sales Tell Us About the US Economy Women's Earnings Never Really Recover After They Have Children Americans Are Getting Priced Out of Homeownership at Record Rates Yosemite Employee Fired After Flying Trans Pride Flag ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
