Jerome Powell's reappointment has strengthened the USD

Investors had been awaiting President Joe Biden's decision on who would become the boss for several days Federal Reserve. Will it be as before Jerome Powellor maybe Lael Brainard. In their deliberations, experts gave a chance that a woman would become the head of the most powerful central bank in the world. However, the US president chose otherwise.

Joe Biden has nominated Jerome Powell for a second four-year term as Fed chairman, a sign that the US central bank may continue its plans to tighten its financial policy and maintain central bank stability. Counter-candidate Lael Brainard, with a softer attitude to the Fed's financial policy, will be vice-president.

Although the nominations are yet to be approved by the US Senate, a continuation of already initiated actions is to be expected. On November 3, the Fed decided to start slowing down the monthly pace of asset purchases net of $ 10 billion for treasuries and $ 5 billion for mortgage-backed securities, starting at the end of the month. Policymakers added that similar cuts in pandemic emergency support are likely to be appropriate each month, but are ready to adjust the pace of purchases if warranted by changes in economic outlook.

The nomination is favorable for the currency

The dollar seems to have reacted with a strong appreciation to Powell's nomination as the market may have started to price in more chances of a monetary tightening in the US. With the rising dollar, the yields on US bonds soared and thus share prices fell, negative real interest rates may have decreased. Moreover, the market estimates that in 2022 the Fed will raise interest rates three times: in June, September and December. This is a very bold valuation, because the Fed itself in its macroeconomic projections, which are likely to change, did not estimate the first rate hike until 2023.

Quotations EUR / USD pairs We saw the 1,12 level recently in the summer of 2020, and investors in the options market seem to be increasing their bearish bias towards the EUR / USD exchange rate. As reported by the agency Bloomberg, yesterday there was a transaction with the option expiry price levels as high as 1,10. This is where the epidemic begins to hit the financial markets.

Stronger dollar, cheaper gold and silver

The strong US dollar could translate into gold and silver prices, which fell significantly during yesterday's session, and today in the morning an ounce of gold should be paid just over $ 1800. A few days ago, an ounce was $ 1870. Silver, on the other hand, fell from the region of $ 25,30 to $ 24,00.

Currently, the most important for the dollar may be the nearest labor market data, followed by the Fed's monetary policy decision.