Warsh's Silence Sparks Credibility Concerns as Markets Await NFP Report

Markets are on high alert after Fed Chairman Kevin Warsh's lack of communication about the reaction function raised credibility concerns. This has led to a steepening curve and a lower USD, with investors calling Warsh's bluff over the Fed's ability to deliver price stability.

The situation is further complicated by Japan's intervention in the FX market, which capping the slide in the yen. While this may suggest buying opportunities for carry traders, joint interventions between the US and Japan could be different from past experiences.

The upcoming NFP report on Friday will be closely watched, with a median market expectation of 54.0 for the ISM manufacturing PMI. A strong reading could indicate a solid jobs number, but some analysts predict a miss in line with downside sentiment.