Trump Taps Warsh to Run the Fed

For the week ending 30 January 2026

As of midday Friday, global equities gained on the week, with the S&P 500 notching a record high on Tuesday. The yield on the US 10-year Treasury note was unchanged on the week at 4.24%, while the price of a barrel of West Texas Intermediate crude oil gained $4.50 on supply disruptions and concerns over the potential for US military action against Iran. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), fell to 17.25 from 18.15 a week ago.

MACRO NEWS

Trump nominates Kevin Warsh as Fed chair

On Friday morning, US President Donald Trump nominated former Federal Reserve Governor Kevin Warsh to become the next Fed chair. Warsh served as a governor from 2006 to 2011. While serving, Warsh was skeptical of the Fed’s second round of quantitative easing in response to the Global Financial Crisis. Warsh was a finalist for the role of Fed chair in 2017, but Trump instead chose Jerome Powell, whose term ends in mid-May. Warsh is seen as a pragmatist who thinks the Fed has strayed from its mandate and that its balance sheet is too large. Rising productivity may allow the economy to run a bit hotter than otherwise, he believes. His appointment is seen as largely allaying recent concerns over Fed independence.

Warsh is expected to be easily confirmed by the US Senate. However, Senator Thom Tillis of North Carolina, a member of the Senate Banking Committee — which must vote to confirm the nomination — said Friday morning that though he believes Warsh is a “qualified nominee with a deep understanding of monetary policy,” he will hold up the nomination unless the Department of Justice investigation into Powell is dropped. Given Warsh’s relatively hawkish reputation, the US Treasury curve steepened modestly on the news while the dollar rebounded. US equity futures pulled back about 0.5%.

Upbeat Fed stands pat

On Wednesday, the Federal Reserve kept rates steady at 3.5%–3.75%, with Governors Stephen Miran and Christoper Waller the only members voting in favor of a quarter-point cut. Chair Jerome Powell noted that the outlook for economic activity has clearly improved since the FOMC last met in December. “Overall it’s a stronger forecast,” Powell said, with growth on solid footing, the labor market broadly stable and inflation risks diminishing somewhat. Asked to offer advice to his successor, Powell advised that he steer clear of politics.

Dollar drama

President Trump said Tuesday afternoon that he isn’t concerned about the recent decline in the US dollar, setting off a flurry of dollar selling. However, comments on Wednesday morning from US Treasury Secretary Scott Bessent helped sooth market jitters as he reiterated the US’ strong dollar policy and said “setting the right fundamentals” will underpin the greenback. Bessent cited the shrinking US trade gap, strong economic growth and record stocks as examples of such solid fundamentals.

Shutdown redux

Large swaths of the US government could shut down this weekend if Republicans and Democrats don’t reach a deal on immigration enforcement. Funding for the Department of Homeland Security is tied up in a broader spending bill that also covers the Defense Department, the Transportation Department and several other agencies. While President Trump and Senate Minority Leader Chuck Schumer are close to working out an agreement, with the House of Representatives out of session this week, it appears impossible that any compromise bill will pass before existing funding expires at 12.01 a.m. on Saturday. As a result, a short shutdown looks unavoidable at this stage.

UK, China deepen ties

British Prime Minister Keir Starmer visited Beijing this week and sought to reset relations between the UK and China after years of strained relations over China’s handling of Hong Kong, a former British colony. After meeting with Chinese President Xi Jinping, Starmer said the UK is beginning a new, “sophisticated” relationship with China. The leaders agreed to launch a feasibility study into opening up markets in business and financial services. The two sides also signed deals to halve Chinese tariffs on whisky from 10% to 5% and introduce visa-free travel for British citizens. In response, President Trump warned Starmer on Thursday that it is “very dangerous” for the UK to build closer business ties with China.

QUICK HITS

Producer prices in the US rose more than expected in December, jumping 0.5% month-over-month and 3% year-over-year. However, the components that feed into PCE were less worrisome, economists note.

The European Union has designated Iran’s Islamic Revolutionary Guard Corps as a terrorist organization and will impose new sanctions on Iran.

A poll by Japan’s Nikkei shows that the ruling Liberal Democratic Party is on track to win a majority of seats in Japan’s lower house of parliament in next week’s snap election.

India and the EU announced a trade agreement that will lower tariffs on European vehicle exports by about 40%.

Bolstered by a jump in bookings for commercial aircraft, US durable goods orders rose 5.3% in November while core orders rose 0.7%. Both measures beat expectations.

The eurozone economy grew 1.3% in Q4, while the unemployment rate ticked down to 6.2%, matching the record low.  

The Conference Board’s measure of consumer confidence tumbled in January as more respondents said jobs were harder to get than said jobs were plentiful. At 84.5, the index stands at its lowest level since 2014. The data  conflict with the Fed’s more upbeat take on the state of the US labor market.

US population growth slowed in the 12 months through July 2025, according to the US Census Bureau, rising only 1.2 million. That’s down from the 2.7 million increase from the previous 12-month period.

While US officials are relatively blasé over recent dollar weakness, German Chancellor Friedrich Merz said he is watching the rising EUR/USD exchange rate with concern.

The Bank of Canada held rates steady at 2.25% on Wednesday, as expected.

On Thursday, President Trump warned Iran that time is running out to reach a nuclear deal.

The US trade deficit widened to $56.8 in November from 29.2% in October. The wider deficit pulled down the Atlanta Fed Q4 GDPNow reading to 4.2% from 5.4% before the trade figures.

The Kremlin said Friday that Russia has agreed, at the request of President Trump, to halt strikes on Kyiv for a week amid bitter cold temperatures.

The US Treasury Department said Thursday that the Chinese yuan is substantially undervalued and urged China to let the currency strengthen in a timely and orderly manner.

President Trump said Thursday that the US will de-certify Canadian-built business jets unless Canada certifies US-made Gulfstream jets, and that he would impose 50% tariffs on imports of Canadian jets unless the situation was “immediately corrected.”  

Bloomberg reports that US high-grade issuers sold more than $200 billion in bonds in January, a record start to the year.

EARNINGS NEWS

With about one-third of the constituents of the S&P 500 Index having reported, blended earnings per share (which combines reported data with estimates for those that have yet to report) rose 11.7% compared with the same quarter last year, according to data from FactSet. Blended sales have risen 8.3% year-over-year. 

THE WEEK AHEAD

Monday: Global manufacturing PMIs

Tuesday: US JOLTS survey

Wednesday: Global non-manufacturing PMI; eurozone CPI

Thursday: Bank of England meeting; ECB meeting

Friday: US and Canadian employment reports

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Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research.