Jerome Powell has made clear his intention to remain as a governor of the Federal Reserve, remarking on the extraordinary nature of recent criticisms from political figures. The likelihood of Powell choosing to resign as Fed Chair by May 14 has increased slightly to 4.9%, a change from 4% just a day earlier.
This unwavering position has tempered prospects for an early exit from his role. Current market indicators for May 14 reveal minimal fluctuations, indicating that investors are largely not anticipating his sudden resignation. Conversely, the market setup for May 15 shows heightened volatility, currently pegged at 73.5% in favor of a possible resignation, which suggests that traders foresee a significant event may trigger changes directly following the May 14 deadline.
Notably, trading patterns hint at a significant jump in positions in the term structure, with a 69-point increase expected from May 14 to May 15. This indicates that investors believe an important announcement or event could occur immediately after May 14. For later dates, speculations about Powell's departure peak, showing confidence at 96.2% for May 31 and an overwhelming 99.4% by June 30.
In terms of market activity, daily trading volume for the May 14 market stands at $7,068, while the May 15 market has seen slightly higher activity at $7,888. However, the May 15 market operates on thin margins, where even a $507 trade could lead to a five-point shift, making it sensitive to sizeable orders.
Powell's recent comments further diminish expectations of his imminent resignation, with a projected payout of 20 times on a YES bet for a May 14 exit, which pays out $1 if he steps down. Investors must weigh this possibility against Powell's public commitment to his position.
Changes in the political landscape, particularly in response to Trump's statements or any developments concerning the Senate Banking Committee's considerations of Kevin Warsh’s nomination, could alter the timing of Powell's potential resignation.