US president Donald Trump could speed up naming a successor to Fed chair Jay Powell, a move that could considerably undermine Fed policymaking in the interim. Trump berated Powell once more and said he could pick the next Fed chair as early as September, well ahead of Powell’s leaving date in May 2026, effectively creating a shadow Fed chair who the markets will listen to.

Trump will seek yes man who will cut – he's already been calling for rates to be 2-3pts lower. Fed governor Kevin Warsh and National Economic Council director Kevin Hassett have been touted as potentials.

Bottom line – the Fed is staying cautious on rates right now, but if we get a shadow Fed chair in the autumn saying he will slash rates as soon as possible (ie May 2026), you will seee inflation fears rise and markets will sell long-dated bonds and push the dollar lower. As this comes at the same as the tax bill cements massive fiscal deficits you can see why markets are starting to look jittery again.

The comments sent the dollar lower with the euro hitting its best since 2021, the Swiss franc at a decade high and the pound at its highest against the greenback since January 2022.

European markets are a tad firmer this morning after sliding yesterday. Defence stocks like Rheinmetall outperformed, but banks and consumer names lagged. The FTSE 100 fell to a four-week low despite a boost for defence firms led by Babcock. Crumbling oil futures hit Shell and BP. Shares are a tiny bit higher in London and firmer still in Frankfurt and Paris.