Global markets turned defensive, impacting gold and the Australian dollar, amid speculation that US President Donald Trump is considering Kevin Warsh as the next Federal Reserve chair. This prospect pushed Treasury yields higher and strengthened the US dollar. Trump indicated that he plans to announce his nominee for the Federal Reserve leadership on Friday; Bloomberg reported that Warsh, a former Fed governor, visited the White House on Thursday.
Across Asia, shares experienced declines, with the Hang Seng in Hong Kong dropping by 1.7 per cent and the Nikkei 225 in Tokyo decreasing by 0.9 per cent. Wall Street futures signalled a potentially subdued opening later in the day. Market focus remains firmly on the forthcoming announcement from the White House regarding the Federal Reserve’s future direction.
The anticipation of Warsh’s potential nomination – viewed by markets as suggesting fewer aggressive rate cuts – led to a strengthening of the US dollar. Consequently, gold experienced a significant dive, falling by 1.9 per cent to approximately $US5200 an ounce, after having traded above $US5500 on Thursday. Silver also saw a considerable decrease, dropping 3 per cent to around $US110.
The Australian dollar mirrored this downward trend, declining by 0.7 per cent to approximately US70.05¢. Investors are closely monitoring developments and adjusting their positions in response to the evolving outlook for US monetary policy. These currency and commodity movements reflect broader market uncertainty as stakeholders await further clarity from the US Federal Reserve.
