Greenback awaits Trump's decision on the next Fed chair

With the FOMC meeting turning out to be a non-event, investors now turn their attention to the US President Donald Trump's announcement of the next Fed chair on Thursday. Although the latest market chatter suggests that Jerome Powell, who is a moderate, is the leading contender, it wouldn't be a big surprise if Trump decided to pick one of the other candidates.

• Fed meeting: Interest rates unchanged at November meeting
• FOMC statements: Comparison between September and November

Stanford economist John Taylor seems to be the next in line if Trump decides not to go with Powell. The US Dollar Index could gain traction in case Taylor becomes the next chair as his hawkish stance would allow investors to price more rate hikes than currently expected.

In a recent report, ING economists explained that they were forecasting two more rate hikes in 2018. However, analysts further added "as for the 2018 outlook for policy, it really depends on who President Trump announces on Thursday who'll be the next Fed chair. Should it by John Taylor or Kevin Warsh, who appear to be backing a more mechanistic (and hawkish) approach to implementing Federal Reserve policy then we would likely put in a third hike and possibly even a fourth. Whoever Trump chooses we think the market is being far too conservative in barely pricing in one hike for next year."

• The Fed: support for a December rate hike, who will be next Chair? - ING
• US: Who will lead the Fed? - Rabobank