US President Donald Trump will interview Federal Reserve Governor Christopher Waller for the top Fed position on Wednesday. Waller is competing with National Economic Council Director Kevin Hassett and former Fed Governor Kevin Warsh, who have also been interviewed. In July, Waller backed a rate cut due to worries about the job market. A Wall Street Journal poll in October showed that many economists support him for his consistent arguments for lower rates.

Role Of The Federal Reserve

Despite his views, Waller’s chances might be low since he doesn’t have a personal relationship with Trump. The Federal Reserve shapes US monetary policy to maintain price stability and full employment mainly by adjusting interest rates. The Fed holds eight policy meetings a year, where the Federal Open Market Committee decides on monetary policy. In extreme cases, the Fed can use Quantitative Easing (QE) to increase credit flow and influence the US Dollar. Quantitative Tightening (QT) is when the Fed decreases its bond purchases, impacting the US Dollar’s value. These economic tools are crucial for the US financial system and affect the global economy. The news about President Trump interviewing Waller could signal a major change in monetary policy. Waller is known for his dovish stance, favoring lower interest rates to help the economy. This raises the chance of rate cuts in early 2026, which might weaken the US Dollar.

Market Implications

This dovish outlook aligns with recent economic data. The November 2025 jobs report showed a slowdown, with non-farm payrolls falling short of expectations and the unemployment rate rising to 4.2%. Additionally, the latest CPI inflation rate dropped to 2.1%, allowing the Fed to ease policy without worrying about rising prices. For us, this suggests preparing for a weaker dollar and lower interest rate expectations in the coming weeks. We might consider options on currency futures, like buying puts on the Dollar Index (DXY) or calls on EUR/USD and GBP/USD. Interest rate futures also present opportunities, as markets will start factoring in a more aggressive rate-cutting cycle for 2026. However, Waller’s selection is not guaranteed, creating uncertainty in the market. This implies that implied volatility in forex options could be undervalued and may increase sharply on any announcement. Therefore, strategies that benefit from large price movements in either direction could be wise until a final decision is made. We’ve seen political pressure on the Fed before, especially in 2018-2019. During that period, presidential remarks caused sharp, short-term changes in the dollar and stock markets. We expect similar headline-driven volatility as the selection process unfolds, regardless of who is ultimately chosen. Create your live VT Markets account and start trading now.

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