Investors are wondering if President Donald Trump is about to fire Federal Reserve Gov. Lisa Cook. President Richard Nixon is aiming to win a second term at the White House, putting pressure on then-bred chairman Arthur Burns to ease his monetary policy before the 1972 election. Tape recordings of the oval office discussion show that Nixon, who resigned from the office in 1974 due to abuse that led to the Watergate scandal, used both direct and indirect behavior to force a burn. More than 50 years later, Nomura’s currency strategist, led by Craig Chan, spoke about how Trump’s decision to fire Cook, the first African-American woman to sit with the Fed, responded to how investors responded to “refocusing” investors and using the previous moves as a guide post to expect now. In the present case, Trump cited an unproven allegation of false statements made when applying for a mortgage. Cook said the president “has no authority” to fire her. Certainly, Chang said history “may not be entirely in line with other variables, given how the market has changed since the era of the fixed exchange rate, gold standard and postwar financial system. Still, Nomura analysts noted the historical parallels between Trump’s attempts to fire a chef on Monday and Nixon’s push for less restrictive monetary policy in the early 1970s. According to Chan: Currency The Ice Us Dollar Index (DXY), which measures the US greenback against baskets of foreign currencies, looks back below how it went back to Nixon’s year. The index rose 0.5% from November 6, 1972 (the day before the election), and rose to its peak in January of the following year. However, the dollar index turned south, reducing 18% in July 1973. Similarly, inventory has replaced slides that are astounding as inventory rises. The Dow Jones industrial average added more than 6% between the peak between November 6, 1972 and mid-January 1973. However, within a year of hitting that high, the blue chip average plunged by 19%. Within two years since its peak in January 1973, the average of 30 stocks at one point plummeted by 44%. As inflation accelerated, US Treasury yields skyrocketed. In total, between November 6, 1972 and August 7, 1973, the 10-year yield rose above 130 basis points. At one point, yield reached a high of 7.58%. Nomura’s outlook today The stock market on Tuesday morning appeared to shake off much of the impact of attempts to fire the chef. So far, the stock market appears to have surpassed Trump’s pressure on the Fed, despite growing concerns over central banks losing their independence and potentially impacting inflation. However, the US dollar hit Tuesday, with the ICE US Dollar Index down 0.3%, a basket of other currencies, with the year’s decline to nearly 10%. Gold futures were concerned that the politicized Fed would qualify for its inflationary combat. Notified by Nixon’s parallel, Chan and his team are looking at “the weak risk of USD if the market fears losses to FRED’s independence.”
