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Fischer leave is a big uncertainty in further Fed steps

FX:EURUSD   Euro / U.S. Dollar
Fed Vice President Stanley Fischer leaves his post.

Surprising news on Wednesday was Vice President Fischer resignation letter submitted by choice. For Trump, whose views on trade and banking regulation differ significantly from the Fed, Fisher's withdrawal became an opportunity to smooth out the contradictions by promoting a loyal candidate to the leadership. And with the end of the term of the chairman Janet Yellen in February next year, the president may even have a chance to ensure the political convenience of the central bank . Recalling the large-scale infrastructure plan, cheap dollar and deregulation of the banking sector (abolition of the Dodd-Frank Act), one can imagine what is the Fed that Trump would love. Obviously, which would have a course opposite to the current one.

One of the Fisher's distinct virtues was an unshakable belief in macroeconomic theory. Despite the fact that many of his colleagues were worried about the global decline in inflation , he believed that a decrease in unemployment at some point would give an impetus to inflation , insisting on the need for higher rates. His departure threatens the cycle of normalizing the policy and in the short term puts a cross on the third rate increase this year. According to the futures market, the chances of a December tightening fell to 31.3%.


Hurricane Irma.

Oil prices went down in decline on fears that Hurricane Irma rampant in the Caribbean can cause disruptions in the supply of crude oil to the US, while Libya is returning to the world market, restoring production. The refineries in Louisiana and Texas are slowly restoring their work, repairing the damage that supports prices. WTI broke the growth, trading around $49, the problems of shale producers allowed Brent to continue growth on Thursday.

Tax reform of Trump and raising the ceiling of public debt.

The dollar can be supported by the Congress decision to raise the ceiling of the national debt, as well as Trump's promise to tackle the tax reform closely. On Wednesday, he said that in the next two weeks he would plunge into the details of the tax plan, which until then lacked for details, even after several months of discussions in the administration and Congress. The large-scale tax reform promised by Trump earlier this year, subject to its approval by Congress, can be seen as a powerful stimulus measure, allowing to accelerate inflation and give impetus to consumer demand.


Decision on the monetary policy of the ECB and Draghi's speech.

Markets are waiting for Draghi's comments on the recent strengthening of the euro and its possible pressure on inflation . The head of the ECB continues to keep investors in suspense without revealing the details of the QE tapering, as weak inflation requires stimulus measures, while officials may be mistaken in assessing the appreciation of the European currency by taking it as a result of the region's economic growth. In any case, it is important to extract hints from the Draghi commentary on how the regulator assesses the balance of risks and whether it is ready to start restrictive policies.

Arthur Idiatulin
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This analysis is provided as general market commentary and does not constitute investment advice.
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