Powell is Trump's Goldilocks pick - ING

Analysts at ING bank explained that the US dollar could still fall by around 0.50-0.75% if President Trump were to opt for Powell over Taylor as Fed Chair this week.

Key Quotes:

"What our economists describe as the continuity candidate, a Powell-led Fed is likely to stick to the script of a gradual policy normalisation. This policy stance also poses much less of a risk to potentially inflated stock markets – something which the President clearly uses as a gauge of his economic success.

We would view the nomination of Powell as mildly negative for the US dollar as some of ‘Taylor premium’ is priced out of US markets. Our estimates suggest that we could see up to a 0.50-0.75% reversal in the DXY dollar index.

Decomposing the dollar’s +2% rally over October into “real” and “monetary” shocks, we find that a significantly greater proportion of moves can be attributed to the real channel – that are factors causing a positive reassessment of US economic fundamentals. While part of this real story is undoubtedly greater hype over US tax reforms, strictly speaking, it also incorporates the fact that US economic data has been fairly constructive in October – with our US data surprise index having moved sharply higher on the month."