From Marc Chandler at Bannockburn Global Forex:
Overview: The dollar's impressive recovery from the pre-weekend sell-off spurred by comments from Federal Reserve Chair Powell at Jackson Hole was challenged earlier today on news that President Trump was carrying out his threat to fire Federal Reserve Governor Cook. Cook will reportedly challenge the president's authority. The dispute revolves around whether there is "cause", which is usually understood as job-performance related. Now, as the North American session is about to start, the greenback is narrowly mixed against the G10 currencies, with the euro, yen, and sterling leading the way. The Scandis are underperforming. Emerging market currencies are mixed, with the South Korean won (no tariff relief despite yesterday's meeting in Washington) and the Taiwanese dollar are laggards. The PBOC set the dollar's fix slightly higher today after yesterday's new low for the year.
The US equities retraced some of the pre-weekend's surge, and this has is taking a toll today. Nearly all the large markets in the Asia Pacific region but Taiwan and Shenzhen fell. Europe's Stoxx 600 is off nearly 0.45%, which if sustained would be the largest loss since August 1. US index futures are slightly softer. European bond yields jumped yesterday but have come back 1-3 bp softer. French bonds are lagging behind the other eurozone bonds today amid worries that the government will not survive the confidence vote called for early next month. The 10-year Gilt yield is up nearly four basis points as its plays catch-up after yesterday's bank holiday. The US 2–10-year yield curve is steepening and near 58 bp it is the steepest in four months. Treasury will sell $69 bln of two-year notes today and $85 bln in six-week bills. Gold is posting an outside day. A close above yesterday's high (~$3376) would be seen as constructive. October WTI's four-day rally is being challenged. It reached a little above $65 yesterday and is trading near session lows, around $63.70 in the European turnover. Yesterday's low was closer to $63.50.
USD: After the sharp sell-off that took the Dollar Index to a new low for the month before the weekend, it rebounded more than we expected yesterday....
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From Federal Reserve History.org:
The Treasury-Fed Accord
March 1951
In March 1951, the US Treasury and the Federal Reserve reached an agreement to separate government debt management from monetary policy, laying the foundation for the modern Fed....
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And from Charles Plosser, via the Federal Reserve Bank of Richmond Virginia:
Federal Reserve Independence: Is it Time for a New Treasury-Fed Accord?*
....In a remarkable stroke of foresight, Goodfriend (1994) suggested that the Fed and Treasury consider a "new Accord" to address Fed credit policies. He worried that "large federal budget deficits, a deposit insurance crisis, or a significant foreign exchange market intervention" might give rise to increased fiscal pressures on the Fed and specifically on its credit policies.9
Goodfriend (1994) recommended that such a "new Accord" be based on the following principles: "(1) liquidity assistance should not fund insolvent institutions; (2) credit policy should not fund expenditures that ought to get explicit Congressional authorization; (3) Congress should not direct the Fed to transfer assets to the Treasury in order to reduce the Federal debt." Such an agreement, of course, has not come to pass.
Events since 2008 have strengthened the case for greater clarity of the boundaries between the Fed and both the Treasury and Congress regarding the decision-rights and accountability of credit policies....
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We visited Plosser a few times, he was a very sharp guy:
- Former Philadelphia Fed President Charles Plosser: "Why The Fed Should Only Own Treasuries"
- Fed Purchases Of Mortgage Backed Securities Have Destroyed The Housing Market
- The Mortgage Backed Securities Trap The Federal Reserve Set For Itself, In One Chart
- "How and Why the Fed Should Tweak QT"
- Atlanta Fed Head Raphael Bostic On Mortgage Backed Securities: "We are going to have to actively try to sell them."
Professor Plosser died August 14, 2025. Again, from Federal Reserve History:
Charles I. Plosser
President, Federal Reserve Bank of Philadelphia, 2006 – 2015
Born: September 19, 1948
Died: August 14, 2025Charles I. Plosser served as president and chief executive officer of the Federal Reserve Bank of Philadelphia from 2006 to his retirement in 2015.
Plosser was born in Birmingham, Alabama. He earned a bachelor's degree from Vanderbilt University in 1970 and master's and doctoral degrees from the University of Chicago, in 1972 and 1976 respectively.
Before coming to Philadelphia, Plosser was the John M. Olin Distinguished Professor of Economics and Public Policy and director of the Bradley Policy Research Center at the William E. Simon Graduate School of Business Administration at the University of Rochester, where he also served as dean from 1993 to 2003. He was also a senior research associate at the Rochester Center for Economic Research in the university's College of Arts and Sciences, and a research associate at the National Bureau of Economic Research in Cambridge, Massachusetts. In addition, Plosser has been a visiting scholar at the Bank of England and the Federal Reserve Bank of Minneapolis. Plosser was also the co-editor of the Journal of Monetary Economics for twenty years....
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His undergraduate degree was in engineering (cum laude with honors) and his first advanced degree was a U.Chicago MBA before his Chicago econ. Doctorate. Interesting cat.
