Donald Trump has named Stephan Miran as the new Federal Reserve governor, causing a temporary dip in the US dollar. Miran steps in for Adriana Kugler, who resigned unexpectedly, and will hold the position until January, though he may be reappointed. Miran is the current Chairman of the Council of Economic Advisers. He has previously argued against the idea that tariffs lead to inflation and believes that interest rates are too high. His viewpoints suggest a move toward a more relaxed monetary policy, which is in line with recent votes by Christopher Waller and Michelle Bowman to reduce the key interest rate.

Complex Tenure and Challenges

Miran’s short time in office makes it hard to determine how well his beliefs fit with the Fed’s neutral stance. This could create tension within the Fed and complicate communication, especially as interest rates may be reduced. His appointment coincides with predictions of a higher EUR/USD rate, reflecting longer-term market views. With Stephan Miran’s arrival, we see signs of a more dovish Federal Reserve. Market expectations have already shifted; Fed funds futures now indicate a 65% chance of a rate cut at the September FOMC meeting, up from 40% just a week ago. The US dollar has responded as anticipated, with the EUR/USD pair breaking above the 1.10 level for the first time since March. The uncertainty around Miran’s brief tenure and his alignment with the Fed’s non-political role is making the market nervous. The MOVE index, which measures bond market volatility, has risen over 15% since the announcement. This suggests that we should consider buying options straddles on interest-rate-sensitive assets like Treasury note futures to benefit from the expected price swings.

Dollar Direction and Economic Data

We believe the dollar’s likely direction is downward in the coming weeks. Miran’s preference for lower rates, along with recent similar votes from Waller and Bowman, supports this view. It may be wise to buy near-term call options on the euro or other major currencies against the dollar. This situation is reminiscent of 2019 when similar political pressures led to Fed rate cuts and dollar weakness. Upcoming economic data will be interpreted through this political lens, leading to stronger market reactions. July’s core CPI, which fell to 2.8%, could support a rate cut, especially since the latest Non-Farm Payrolls report showed only 150,000 jobs added—lower than expected. Every statement from the Fed, especially from Miran, will be closely scrutinized, making derivatives tied to FOMC meeting dates highly active. Create your live VT Markets account and start trading now.

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