U.S. Indices ended the day very rangebound on Friday, ahead of the long US weekend due to Martin Luther King Day on Monday. Sectors were mixed, with Real Estate sitting top of the pile with Health lagging, amid a lack of tier 1 US data. While data and Fed speak was fairly light, the Dollar saw upside and Treasuries sold after President Trump suggested he will keep Hassett as NEC Director and will not be his choice his Fed Chair. Following the indication from Trump, T-Notes tumbled to lows across the curve, given Hassett is seen as the most dovish candidate, and less friendly for Fed-independence; traders pulled back Fed rate cut bets. Elsewhere on the matter, FBN reported that those inside the interview with Rick Rieder for Fed chair saw it as a positive that he was the only candidate with no prior Federal Reserve experience. Markets are largely favouring former Fed Governor Warsh as the next Fed Chair now, with Kalshi assigning Warsh’s probability at 59%. Rieder still lags at 10%, however. Overall, the Dollar was flat with the Japanese Yen outperforming after Bank of Japan sources and the latest jawboning. The crude complex was fairly maintained in what has been a busy week in geopolitics, and while energy settled firmer, benchmarks pared some gains after Trump said he greatly respects the fact that all scheduled hangings, which were to take place yesterday (over 800 of them), have been cancelled by the leadership of Iran. Spot silver was weighed on by updates from China (adjusted trading limits for silver futures), while spot gold also saw losses, albeit not to the same magnitude. Fed speak came via Fed dove Bowman, who noted the Fed should not signal a pause in rate cut campaign, while Jefferson does not want to prejudge January rate-setting decision and Fed rate cuts since 2024 have brought policy rate into range consistent with neutral; note, Fed goes into blackout this evening ahead of the aforementioned FOMC confab. Fed Governor Bowman continued to show her dove stance. She believes the Fed should be ready to cut rates again due to job market risks, noting the Fed should not signal a pause in the rate cut campaign. She added that the risks to the Fed’s mandate are asymmetric, and the Fed should be ready to cut again if the labour market needs. In her view, monetary policy is modestly restrictive, and she notes that policy should be forward looking. She sees solid growth and lower inflation, which should stabilise the labour market, noting the economy has been resilient. However, she is concerned about labour market fragility, stressing policy should be focussed on supporting the jobs market. She acknowledged the Fed has made considerable progress on lowering inflation, noting underlying inflation is close to the Fed’s 2% target. She also noted that inflation pressures are easing as tariff impact abates. Fed Member Jefferson does not want to prejudge January rate-setting decision. He believes that some upside risks remain but expects inflation to return to its path back to 2%. Jefferson views inflation as somewhat elevated, with the climb in core goods prices inconsistent with the return to 2% inflation. He is cautiously optimistic for 2026, though faces risks to both employment and price stability goals. The Governor expects 2% economic growth in the near term and the unemployment rate to hold steady. Elsewhere, Oil closed higher by 0.4% while Gold ended Friday’s volatile session flat.
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