Weekly house view

The week in review

US President Trump nominated Kevin Warsh as the next chairman of the Federal Reserve. Warsh has proposed a new Fed-Treasury accord aimed at redefining their relationship, and called for a reduction in the size of the Fed’s balance sheet, which he believes could allow for lower interest rates without harming the US dollar (USD). Despite his former reputation as an inflation hawk, Warsh has recently argued publicly for lower rates. He supports a strong USD and has criticized the Fed’s post-2008 policies for weakening it.

Warsh’s view on the USD, and his desire for a smaller Fed balance sheet, were behind a sell-off in precious metals last week. Gold lost 1.9%; silver, palladium and platinum all suffered double-digit losses. The USD gained 0.2%. WTI oil prices rose 7% on US threats to strike Iran. Warsh will succeed incumbent Fed Chairman Jerome Powell, whose term as chair ends in May. Powell’s governor term ends in 2028. However, Fed governor Stephen Miran’s term ended on Saturday, creating a slot for Warsh.

In Japan, two key opposition parties said they were joining forces ahead of an expected snap election; they want even more expansionary fiscal policies. The EU and India signed a trade deal after nearly two decades of negotiations. The agreement aims to double EU goods exports to India by 2032.

Geopolitics

Trump wrote in a social media post: “A massive Armada is heading to Iran. It is moving quickly, with great power, enthusiasm, and purpose.”

Key data

US producer prices rose 0.5% in December, more than expected. However, key inputs for the Personal Consumption Expenditures (PCE) index – closely watched by the Fed – remained relatively soft. China's industrial profits for December 2025 rebounded with a 5.3% year-on-year rise, a turnaround after a 13.1% contraction  in November 2025. Eurozone gross domestic product (GDP) rose by 0.3% quarter-on-quarter in the fourth quarter and grew by 1.3% year-on-year. Both measures were slightly higher than consensus.