Trump's confidant may take over the Federal Reserve to "cut interest rates"! US stock market sees a big pump, Bitcoin and USD both crash.

The selection of the chairman of the Federal Reserve in the United States has entered its final stage, with Trump's long-time economic advisor Kevin Hassett being the most popular candidate. Treasury Secretary Mnuchin revealed that Trump will finalize the next chairman before Christmas. Hassett is seen as a “strong dovish” candidate, with the expectation of a rate cut in December soaring from 40% to 84%. The US stock market has rebounded strongly driven by AI chains, and the dollar index has fallen below 100, while Bitcoin has dropped to around $87,792.

Trump's confidant Hassett is the top candidate for Federal Reserve Chairman

As the selection process for the new chair of the Federal Reserve enters its final stage, White House National Economic Council Director Kevin Hassett is quickly emerging as the strongest contender for the next Federal Reserve chair. According to reports from Bloomberg citing multiple informed sources, President Trump is considering appointing one of his long-time economic advisors to replace current chair Jerome Powell, with Hassett seen as the candidate most in line with Trump's policy preferences.

Multiple sources familiar with the situation have revealed that Trump views Hassett as a close ally who is “familiar, trusted, and able to implement the president's economic philosophy.” As the director of the White House Council of Economic Advisers, Hassett has closely collaborated with Trump and has maintained a high degree of alignment in macro policy direction. Insiders pointed out that Hassett stood out in the final list because he is believed to be able to bring Trump's advocated radical interest rate cuts into the traditionally independent institution of the Federal Reserve (FED).

Insiders within the Republican Party further stated that Hassett is a “staunch supporter of Trump's economic agenda,” particularly regarding interest rate policy, as he has repeatedly called for faster and larger rate cuts. Earlier this month, Hassett explicitly stated in an interview with Fox News that if he were at the helm of the Federal Reserve, “we would cut rates now,” citing that “the data shows we should do this.” He has also publicly supported Trump's view that interest rates are too high and are suppressing growth on multiple occasions.

This series of signals has raised concerns in the market about the potential impact on the independence of The Federal Reserve (FED) in the future. Many investors believe that if Hassett takes over, there will be a clear shift towards a more accommodative monetary policy framework that aligns more closely with Trump's expectations. As speculation about candidates continues to rise, White House Press Secretary Karoline Leavitt remained cautious in her response, stating, “No one knows what he will do until the president actually makes a decision.”

Other Candidates for The Federal Reserve (FED) Chair

Christopher Waller: Current member of the Federal Reserve, known for his dovish stance.

Scott Bessent: Secretary of the Treasury of the United States, responsible for the chair selection process.

Kevin Warsh: Former member of the Federal Reserve, frequently appears on lists in political and Wall Street circles.

Interest rate cut expectations surged from 40% to 84%, igniting the market

(Source: CME Fed Watch)

As the selection of the Hassett people emerges, key economic data from the United States further strengthens the market's expectations for easing policies. The latest data shows that September's retail sales growth in the U.S. was weaker than expected, while the PPI data delayed due to the government shutdown indicates that wholesale inflation remains at a moderate level. The data shows that U.S. retail sales in September recorded a month-on-month increase of 0.2%, falling short of expectations; the PPI for September recorded a month-on-month increase of 0.3%, in line with expectations, compared to a decrease of 0.1% in August.

These two pieces of data resonate with Hasset's dovish tendencies. The CME's Federal Reserve observation tool (FedWatch) shows that the market's bets on a rate cut in December have surged from 30% last week to 84%; the probability expectation for a rate cut in January is 64%. This dramatic shift in expectations occurred within a few days, indicating that the market's concerns about Trump's influence on Federal Reserve policy are rapidly fermenting.

Analysis suggests that energy and food prices are driving the overall PPI higher, but core inflation remains under control. Against the backdrop of Trump's associates possibly taking over the Federal Reserve (FED), the market interprets the moderate inflation data as a signal that “rate cut space is opening up.” LNW Chief Investment Officer Ron Albahary pointed out: “The biggest variable in the current market is not the economic data itself, but whether the independence of the Federal Reserve (FED) will change due to personnel changes.”

U.S. stocks rebound strongly driven by AI blockchain

On a trading day with significant market fluctuations, the three major U.S. stock indices experienced a volatile rise. By the close, the S&P 500 Index was up 0.7%, the Nasdaq Index rose 0.5%, and the Dow Jones Index surged 1.2% or 566 points. Earlier in the session, the three indices had significantly declined, with the S&P 500 dropping about 0.7% and the Nasdaq falling over 1%. However, the strong recovery driven by AI themes pushed the indices back into positive territory.

Alphabet (Google's parent company) led the market, reaching a new high during trading. Previously, reports indicated that Meta is considering spending billions of dollars to purchase Alphabet's AI acceleration chips. The market generally believes this may indicate that the AI computing industry chain is shifting from “GPU dominance” to a more diverse heterogeneous architecture. Ron Albahary pointed out: “The decrease in computing power costs will further enhance demand, and Meta's purchase of Google's chips is a direct manifestation of this trend, which will benefit the entire AI ecosystem.”

However, Nvidia's stock price fell by more than 3%, as investors are concerned that its dominance in the AI chip sector may be challenged by increasing competition. Albahary noted that it is more important to pay attention to whether large cloud computing companies like Microsoft and Amazon will re-establish technological leadership in the new landscape. Despite the rebound in the U.S. stock market this week, the three major indices still face the risk of monthly declines, and whether technology valuations can support a year-end rebound remains a key point of debate.

The dollar index falls below the 100 mark as the risk of yen intervention rises

As the market's bets on a rate cut by the Federal Reserve (FED) continue to heat up, the dollar came under significant pressure on Tuesday. During the U.S. trading session, the dollar index (DXY) fell over 0.5% to a low of 99.67, breaking below the key psychological level of 100; the euro/dollar rose to the 1.1580 level; and the pound/dollar rose to around 1.3200.

Despite the fact that the U.S. dollar index rose last week due to a return of safe-haven funds, expectations for interest rate cuts have once again dominated the foreign exchange market, with most analysts believing that the current level of the dollar is relatively strong. ING foreign exchange analyst Francesco Pesole pointed out that the year-end rebalancing funds before Thanksgiving may temporarily interfere with the dollar's trend, but “unless the market re-prices a more hawkish path, the dollar still faces downward pressure.”

Regarding the Japanese Yen, the USD/JPY fell by about 0.6% to 155.0. Against the backdrop of Japan's new Prime Minister Sanae Takaichi being viewed as a fiscal dove, the Yen has depreciated significantly since October, with market observations of potential intervention by the Bank of Japan reaching a high point. Pesole pointed out that the low liquidity during the Thanksgiving period could provide an “ideal environment” for Tokyo authorities to take action. Reports that Trump confidants may control the Federal Reserve further weakened the dollar, creating more favorable conditions for intervention by the Bank of Japan.

Bitcoin falls to 87,000 USD, panic sentiment begins to ease

(Source: CoinMarketCap)

After experiencing consecutive falls, Bitcoin's decline on Tuesday significantly narrowed, with market sentiment shifting from extreme panic to cautious observation. Bitcoin fell to a low of $86,127.19 but has now rebounded to around $87,792. Despite Bitcoin still facing the risk of recording its worst month since 2022, with ETF funds net outflow exceeding $6 billion this month, a series of market indicators show that the selling pressure is easing.

Caroline Mauron, co-founder of Orbit Markets, stated that the premium of one-week put options relative to call options plummeted from 11% to 4.5%, indicating that investors' concerns about further significant declines are rapidly easing. The relative strength index (RSI) on the 14th dropped to 32, approaching the typical oversold threshold of 30. The market expects volatility to converge, suggesting that speculative positions are exiting.

The Crypto is Macro Now. In a communication article, Noelle Acheson pointed out: “The skew in options shows that positions betting on further declines are clearly decreasing, while interest in betting on rebounds is starting to increase.” The general market view is that $80,000 is a short-term support level, while $90,000 to $95,000 constitutes a rebound resistance zone. However, with the surge in AI capital expenditures, the slowdown in the U.S. labor market, and the uncertainty surrounding The Federal Reserve (FED) policy intertwining, the severe volatility in gold and tech stocks is also impacting the risk appetite for crypto assets.

The news that a confidant of Trump may take over the Federal Reserve poses a dual impact on Bitcoin. On one hand, the expectation of aggressive interest rate cuts theoretically benefits risk assets; on the other hand, concerns over the independence of the Federal Reserve may trigger systemic risks, leading to a flow of funds towards traditional safe-haven assets. Goldman Sachs' risk preference model has fallen to zero, indicating that risk assets are under overall pressure.