Treasury's Bessent hires Trump's controversial former Fed board pick, Judy Shelton, as adviser
The appointment of Judy Shelton as an adviser to Treasury Secretary Scott Bessent indicates a potential pivot towards a more assertive U.S. stance on currency policy, specifically aimed at scrutinizing China's financial maneuvers. Shelton, previously blocked from the Federal Reserve, is expected to leverage her controversial views to influence strategies under the Trump administration. This could signal a shift toward a stronger dollar policy and increased scrutiny of China's practices, impacting U.S. trade dynamics and currency valuations.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). This underscores the mixed sentiments around U.S. currency policy as influenced by recent appointments at the Treasury.
How firms align
JPMorgan aligns with the headline's view, believing stronger currency policies could emerge, with a target of 1.10 for EUR/USD by March 2026. On the contrary, BofA remains skeptical, advocating a lower target of 1.04, which indicates a more cautious approach to anticipated policy changes.
What the data shows
Recent insights suggest that market expectations may be adjusting to acknowledge potential shifts in U.S. currency strategy, as hinted in research documenting risks associated with a more aggressive monetary policy stance. See /research/... for further analysis.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Shelton’s advisory role suggests a potential harsher U.S. currency stance.
- 02Watch for a stronger dollar narrative picking up steam amid trade tensions.
- 03Expect volatility with EUR/USD around key levels, particularly near 1.075.
- 04Monitor upcoming Treasury communications for policy direction clarity.
Market implications
Investors should keep an eye on the EUR/USD pair, particularly around the 1.075 level, as sentiments shift regarding U.S. currency policy. Upcoming speeches from the Treasury will be critical in shaping market expectations.
Risks to this view
A reversal in this outlook could occur if the administration signals a return to a more conventional, less aggressive currency position, potentially dampening the dollar's momentum. Additionally, any backlash against Shelton's views could also impact policy direction.
Sentiment by currency
USD+EUR~JPY~GBP~Composite USD score: +0.65
Sources & References
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