FXStreet reports that economists at MUFG Bank said that potential choice of Fed Governor Lael Brainard presents a high downside risk for the US dollar.
“The tightening labour market will keep pressure on the Fed to keep tightening policy going forward, and speed up rate hike plans if labour force participation does not improve as expected.”
“The Fed did not directly push back against higher yields at last week’s FOMC meeting but neither did it provide any encouragement for the market to price in earlier rate hikes. The improvement in risk sentiment has likely taken some of the shine of the US dollar.”
“There have been reports that President Biden has spoken to both Fed Chair Powell and Fed Governor Lael Brainard at the White House last week as he weighs up his picks for the Fed leadership. The potential appointment of Lael Brainard poses the main downside risk for the US dollar in the near-term. Market participants would expect the Fed to be even more cautious about tightening policy under her leadership.”