Warsh nomination sparks volatility and shifts policy expectations
United States (US) equity markets finished lower on Friday after a session of volatility, triggered by President Trump’s nomination of Kevin Warsh to succeed Jerome Powell as Federal Reserve (Fed) Chair. The move sparked a strong rally in the heavily shorted US dollar, and a brutal flash crash in precious metals, which spilled over into crypto markets.
The nomination of Kevin Warsh brings a degree of credibility and removes one layer of uncertainty currently plaguing markets. It remains to be seen how his traditionally hawkish leanings – which included pushing back against past Fed balance sheet expansion and advocating for higher interest rates due to inflation concerns – have evolved. More recently, he has shown a shift towards a more dovish stance. Consequently, he is expected to at least initially advocate for easier policy, in line with President Trump’s desired path for lower rates.
Earnings calendar turns busy
Looking ahead, this week features another busy fourth-quarter (Q4) earnings slate including Disney, Palantir, AMD, Super Micro Computer, Uber, Alphabet, Qualcomm, Snap, Amazon, MicroStrategy, Roblox, and Under Armour.
On the economic front, the key domestic event is the January non-farm payrolls report, previewed below.
Non-farm payrolls
Date: Friday, 6 February at 1.30pm GMT
For December, the US economy added just 50,000 jobs, falling short of expectations for a gain of around 60,000 and coming in below November’s downwardly revised figure of 56,000. Despite the weak headline number, the unemployment rate edged lower to 4.4%, down from a revised 4.5% in November, which had been the highest level since October 2021.
In last week’s Federal Open Market Committee (FOMC) press conference, Fed Chair Jerome Powell highlighted these mixed signals, noting, ‘Job gains have remained low, and the unemployment rate has shown some signs of stabilisation.’
The January non-farm payrolls report, covering the first full post-holiday month, is expected to show 70,000 jobs added. The unemployment rate is projected to remain steady at 4.4%.
The US rates market starts the week pricing in roughly 50 basis points (bp) of Fed cuts in 2026, with the first 25 bp move anticipated in July and another in December.