Powell stays put: Dollar rebounds as Fed chair keeps top job

The latest data out of the US economy has continued to cast doubt on the prospect of Federal Reserve rate cuts before the autumn. Thursday’s jobless claims figures once again showed no signs that businesses were laying off staff to any real extent. Retail sales also expanded at a solid pace in June (0.6% MoM vs. expectations for a 0.1% gain), partly reversing some of the May contraction. All in all, there remains little conclusive evidence that the tariff uncertainty is having any more than a modest impact on hiring decisions or spending activity, and this should take pressure off the Fed from cutting rates any time soon.

We suspect that the saga surrounding FOMC Chair Powell is unlikely to completely go away. That said, perhaps the biggest surprise is that the market reaction on Wednesday to his potential dismissal was relatively contained, suggesting that markets are becoming increasingly desensitised to Trump’s barrage of criticism. Expect any further threats to Powell’s position to be greeted with an even more subdued response.