#Why Did the Justice Department Drop the Investigation?
The Justice Department has decided to end its investigation into Jerome Powell, who serves as the Federal Reserve Chair. This development removes a significant barrier to Kevin Warsh’s potential confirmation as the new Fed Chair. As a result, the market probability for Warsh's confirmation by May 15 has risen dramatically to 78.5%, a notable increase from just 29% within the last 24 hours.
This decision by the DOJ clears the way for the Senate to proceed with a confirmation vote on Warsh. The market for his confirmation on May 15 saw a significant climb of 49.5 percentage points. Meanwhile, the May 1 market probability remains low at 1.8%, reflecting the tight schedule. The June 30 contract shows a robust 94.2% probability for a YES vote.
#What Market Implications Arise from This Decision?
The increasing gap between the May 1 and May 15 contracts indicates that traders expect a confirmation vote in the imminent two-week window. Senator Thom Tillis had previously pledged to block Warsh's confirmation until the investigation was resolved. With the DOJ investigation concluded, the rationale for Tillis's stance has diminished considerably. This shift suggests that his position could change swiftly in the wake of the DOJ’s announcement.
#What Should Traders Keep an Eye On?
In the past 24 hours, trading volume reached $19,708 in USDC with moderate liquidity. The depth of the market on May 15, sitting at $1,590 to change the price by five points, implies concentrated positioning among traders. A notable price action occurred immediately after the DOJ announcement, evidenced by a 20-point spike that showcases traders' strong conviction.
With the investigation now resolved, Warsh's confirmation appears more attainable as the date approaches. At a price of 78 cents for a YES share, it promises a payout of $1 if confirmed, offering a return of 1.27 times the investment. Future catalysts include any public statements from Senator Tillis and the Senate Banking Committee's scheduling of the confirmation hearing.