US Treasury Secretary Scott Bessent expressed support for the US President’s proposal to cap credit card interest rates at 10%. At a Senate Banking Committee hearing, he noted Kevin Warsh’s qualifications for the Federal Reserve Chair position.
Key considerations include the US President’s discretion on suing Warsh over the Fed’s interest rate policy. Bessent emphasised the importance of Fannie Mae and Freddie Mac in keeping mortgage rates low and opposed reducing tariffs on Canadian goods.
Currency Performance Overview
The USD performed strongest against the British Pound, with a 0.93% increase. Other currency changes include a 0.12% rise against the Euro and a slight 0.06% decrease against the Yen.
The heat map details percentage changes among major currencies. For instance, the USD saw a 0.15% increase against the Canadian Dollar, whereas the British Pound experienced widespread declines. Such data offers a snapshot of current currency market movements.
The proposed 10% cap on credit card interest rates signals significant pressure on the financial sector. With average consumer credit card APRs finishing 2025 near 21.5%, this policy would directly impact profitability for major lenders. We should consider buying put options on financial ETFs to position for a potential downturn in banking stocks.
Policy Uncertainty with Fed Chair Nomination
The nomination of Kevin Warsh as Fed Chair introduces major policy uncertainty. His historically hawkish stance could clash with the administration’s goals, similar to the tensions we saw ahead of the 2022 tightening cycle that sent the MOVE index soaring. We believe going long on interest rate volatility is the most prudent strategy here.
This environment suggests the US dollar will remain strong, particularly against commodity currencies. The commitment to maintain tariffs on Canadian goods reinforces a protectionist trade stance, creating a headwind for the Canadian dollar. This ongoing friction should continue to weigh on the loonie, making long USD/CAD a favorable position.
Today’s data shows significant dollar strength against the British Pound, a trend that appears fundamentally justified. The UK’s final quarter GDP numbers from 2025 showed a slight contraction, raising renewed fears of a recession. We see this as an opportunity to maintain short positions on the GBP/USD pair through derivatives.
