Weekly Asset Heatmap

Weekly Asset Heatmap: Federal Reserve

Online audiences are focusing their attention on Jerome Powell and John Taylor. But regardless of who Trump chooses to chair the Fed, our predictive signals point to increased volatility in the DXY and U.S. 10-yr yields.

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Predata's signals measuring online interest in the main Fed chair candidates comports with market expectations.

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With Trump planning to announce by November 3 his choice to helm the Fed, attention to Jerome Powell and John Taylor on social and collaborative media has been elevated for the past month. Interest in previous frontrunner Kevin Warsh has tanked. And despite reports that she had become a plausible candidate, interest in Janet Yellen has flatlined. These signals don't necessarily point to a greater likelihood one candidate will be chosen over another, but they do show which candidate is garnering more interest in the digital realm.

Digital traffic patterns from previous appointments indicate Trump's decision may not yet be finalized.

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In the five days before Trump announced his choice for Secretary of State last December, Predata's measure of the two components that comprise engagement on social media — chatter (views) and contestation (comments and edits) — both surged for Rex Tillerson. Social media for other candidates, such as Bob Corker, John Bolton, and Jon Huntsman, did not experience similar levels of engagement.

As of today's writing, chatter for both Powell and Taylor is elevated. Yet, neither is experiencing increased levels of contestation. This trend could mean that insiders — who may make advanced edits ahead of a nominee's rollout — still don't know who Trump plans to pick.

Our Federal Reserve signals suggest big moves in the DXY and U.S. 10-yr yields may be forthcoming in the next 30 days.

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Salient threads in the digital debate driving this movement include:
  • Neel Kashkari, a member of the FOMC, said that had the FED diligently followed the Taylor rule, which would have meant higher rates, more than 2.5 million lost jobs would have been lost over the last two-and-a-half years.
  • According to several people familiar with the matter, Treasury Secretary Steven Mnuchin is strongly backing Jerome Powell.
  • Meanwhile, Goldman Sachs' chief US strategist warned that the plus-60 reading of the ISM Manufacturing Purchasing Managers' Index typically marks peak growth and has traditionally been followed by a fall in U.S. equities.

The FED next meets on November 1.

At the time of our writing, the DXY was trading at 93.827. U.S. 10-yr currently yields 2.37% with a forward rate of 2.40%.



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Current Guidance

On October 10, our signals suggested that NAFTA concerns might lead to a depreciation in the peso. At the time of our writing, the USDMXN was trading at 18.67 with a 1-month forward rate of 18.77. In line with our expectations, the USDMXN closed at a 5-month high the next day.


On October 17, our signals suggested that there was going to be a big move in the Swedish krona and 10-yr yields within the next 30 days. At the time of our writing, the EURSEK was trading at 9.5594 and the NOKSEK was trading at 1.0262, with Swedish 10-yrs yielding 0.83%.

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