FOMC Statement

As we noted in yesterday’s FOMC Preview report, the US central bank was never going to make any immediate changes to policy, leaving traders to read Powell and Company’s tea leaves for implications about future tweaks. As it turns out, the tea leaves were clear: The Fed has undergone a major dovish shift.

Spoiler alert: The Federal Reserve won’t be making any immediate changes to monetary policy at the conclusion to this week’s two-day meeting. Nonetheless, it would be a mistake for traders to ignore the central bank’s economic projections and comments.

As he is wont to do on many topics, President Trump has waded into monetary policy discussion ahead of tomorrow’s Fed meeting. Just yesterday, he tweeted, “I hope the people over at the Fed will read today’s Wall Street Journal Editorial before they make yet another mistake. Also, don’t let the market become any more illiquid than it already is. Stop with the 50 B’s. Feel the market, don’t just go by meaningless numbers. Good luck!”

As we anticipated yesterday (see here and here), the risk-on rally in the wake of this weekend’s “trade war truce” between the US and China has sputtered out relatively quickly. With US officials sending mixed messages about the content of the agreement and Chinese leaders maintaining radio silence, investors are increasingly concerned that a broad, long-term agreement within the next 90 days is a big ask.

If you’re one of the many readers who did, you’re excused for forgetting about today’s Federal Reserve meeting. After all, the high political drama in Washington and London continues to draw plenty of headlines, it’s the first time we’ve seen an FOMC meeting conclude on a Thursday in three years, and the central bank was never going to make any changes to monetary policy at its final ever meeting without a press conference anyway.

As we noted in yesterday’s FOMC Preview report, another rate hike this month was a “done deal” for the Federal Reserve, and Powell and Company delivered the expected 25bps increase as expected. The more interesting aspects of today’s release came from the central bank’s accompanying monetary policy statement and the quarterly Summary of Economic Projections.

Political news has dominated today’s headlines on both sides of the Atlantic.

As anyone who was paying a modicum of attention could easily tell you, the Federal Reserve was never going to make any changes to monetary policy at today’s meeting. Instead, traders were tuning in to see any changes to the central bank’s statement and extrapolate what that may mean for interest rates moving forward.

As we noted yesterday, the excitement around today’s FOMC meeting wasn’t about the interest rate decision itself: The Fed delivered its expected 25bps rate hike, bringing the benchmark rate to the 1.75-2.00% range, to little fanfare. Nonetheless, there was still plenty for traders to digest across the central bank’s monetary policy statement, summary of economic projections, and Chairman Jerome Powell’s press conference.

The kickoff to the World Cup is less than 48 hours away, but before getting to that widely-watched celebration, traders will be tuning into a high-stakes performance of another kind: tomorrow’s Federal Reserve Meeting.

The euro is the strongest major currency so far in World Cup kickoff week, perhaps reflecting the fact that three of the four biggest favorites for the tournament hail from the Eurozone...

After the Federal Reserve’s latest interest rate hike in March, the first this year, market expectation for further hikes in 2018 remained steady at two more – one in June and one in September.

For more than a week, the US dollar has risen sharply as US government bond yields have surged – with the benchmark 10-year Treasury yield briefly topping 3% – while geopolitical risk perceptions have tentatively waned.

The Federal Reserve, helmed for the first time by new Fed Chair Jerome Powell, concluded its two-day FOMC meeting on Wednesday, announcing a widely expected 25-basis-point interest rate hike to push the federal funds rate up to 1.50-1.75%.

The Federal Reserve’s two-day FOMC meeting concludes on Wednesday, and markets are heavily focused on Fed officials’ latest economic projections – more specifically, the outlook for future interest rates as represented by the Fed’s “dot plot.”

The past week saw market volatility stabilize from previous weeks as both the US dollar and equity markets sought direction amid continuing concerns over the potential for a global trade war.

The primary driver of rallying gold prices since mid-December has clearly been a plunging US dollar. During the past month-and-a-half, the sharp rise in the price of gold from its mid-December low around $1236 up to its new long-term high around $1365 that was just reached last week, has tracked the equally sharp plunge for the US dollar index during the same period.

As US Treasury yields remained elevated on Tuesday, continuing to pressure equities while largely failing to sustain Monday’s short-lived boost for the US dollar, markets were preparing for the highly anticipated Federal Reserve rate decision scheduled to be released on Wednesday.

On Monday, EUR/USD pulled back further from its new 3-year high above 1.2500 that was just established late last week. This pullback was driven in large part by a rebound for the US dollar on Monday, which followed the greenback’s sharp plunge for much of the past three weeks.

On Tuesday, with markets all but certain that the Federal Reserve will raise interest rates by at least 25 basis points on Wednesday at the conclusion of its heavily anticipated FOMC meeting, the US dollar index continued to be bid up above the key 94.00 price level.

The US jobs report for November was released on Friday. Although the headline non-farm payrolls number came in significantly better than expected at 228,000 jobs added in November against a prior consensus forecast of around 200,000 jobs, wage growth turned out lower than expected.

The official US jobs data for November will be reported on Friday morning by the US Department of Labor, and consensus expectations are pointing to a likely continuation of the strong job creation that has prevailed through much of the year.

As the US dollar continued to rebound on Wednesday, the Canadian dollar fell sharply after the Bank of Canada issued its latest interest rate decision and statement.