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A ROCKY PATH

Markets aren’t just thinking about the Middle East. A Senate confirmation hearing for Kevin Warsh, who is President Donald Trump’s pick to succeed current Federal Reserve Chairman Jerome Powell, is taking up attention Tuesday.

But the path to Fed Chair could be tricky for Warsh.

"We certainly do not live in a world where transitions are smooth and rules-based order run like clockwork," said Atakan Bakiskan, US economist at Berenberg, in a note.

Warsh will likely to be blocked by the Senate Banking Committee, he explained, “courtesy of Republican Senator Thom Tillis, who will likely join the 11 Democrats on the panel to delay the approval as long as the Department of Justice’s criminal investigation into Powell is ongoing.”

That investigation does not seem to be nearing its conclusion, while delays to Warsh’s confirmation could see Powell remain Chair for longer on a temporary basis, which may in turn prompt another challenge from Trump, according to Bakiskan.

“The harsh path for Kevin Warsh as the next Fed Chair -- and the likely legal battles that will accompany it -- could revive the “threats to Fed independence trade”: a weaker dollar and higher rates at the long end of the yield curve,” he said.

(Sophie Kiderlin)

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