Speculation is mounting about the next person to lead the Fed. Will Yellen continue? Will it be someone else? One of the options is John Taylor, best known for the Taylor Rule. How will the US dollar react? Here is the view from BTMU:
Here is their view, courtesy of eFXnews:
BTMU FX Strategy Research believes that the potential appointment of John Taylor as the next Fed Chair has materially increased upside risks for the USD.
“We would not be surprised to see the US dollar index rise initially by between 3% and 5.0% if confirmed.
The market would become more concerned over the increased likelihood of the Fed delivering both more and a faster pace of rate hikes in the coming years. Reality of course may eventually turn out to be different from those initial impressions.
The appointment could also trigger some weakness in risk assets and high beta currencies.
A potential shift to more rule-based policy would by design constrain the Fed’s ability to use some discretion to lean against emerging risks,” BTMU argues.
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