Fed headlines stir the pot in trading this week | investingLive

It was all about the drama yesterday as Fed board of governor member, Lisa Cook, was pressed to resign amid allegations of committing mortgage fraud. And the main person calling for her head of course is US president Trump, as you would have it.

The thing about finding out about these charges and allegations is that there are definitely much bigger and badder criminals out there. However, there is perhaps none as politically beneficial to Trump as this case could potentially be. It’s all about taking over the Fed one person at a time and he is slowly doing just that by removing the people he doesn’t want at the central bank.

For now, markets are taking things in stride with the Fed minutes yesterday instead offering something more pertinent to bite at. The bias of the minutes leaned towards worrying about inflation but it is best to note that this was all before the terrible jobs report on 1 August.

At the balance, I reckon it doesn’t truly reveal the extent in which the dovish dissents have been building in recent weeks. But if anything, it does show that the core stance of the Fed is still well anchored. As such, that will put more pressure on Fed communication in the next two weeks before the FOMC blackout period on 6 September.

As for the bigger picture, I think the headlines involving Cook should be treated with more importance. Trump is slowly chipping away at the Fed’s independence and it won’t be long before markets start focusing a lot more on that and to realise that US financial assets will have lost a chunk of confidence and credibility. Some food for thought there.