The short interruption in the US Dollar's downtrend (by means of the DXY Record) turned out to be only that – a concise delay – as moving at last recovered merchants' creative impulses yesterday following a dreary arrival of the December FOMC meeting minutes. The response (or scarcity in that department) was not really an astonishment, given that Encouraged Seat Jerome Powell's discourse on Friday, January 4 at the AEA's Yearly Gathering, where he reset rate desires only weeks after the FOMC refreshed its Rundown of Monetary Projections in mid-December.
FOMC MINUTES WERE A DUD, ATTENTION ON POWELL SPEECH
Fed Chair Powell’s message on Friday was clear: additional tightening steps, be it rate hikes or balance sheet runoff, won’t materialize as quickly as previously anticipated. The central bank chief noted that the central bank was listening “carefully and sensitively” to the “market’s risk concerns” and it could “shift the process” off-balance sheet normalization if necessary, as there was "no preset path for policy.” Curiously, the minutes revealed a tone similar to Fed Chair Powell’s; it seems as if either 1) Powell did a bad job communicating the Fed’s intentions at the December meeting or 2) the Fed has ex-post facto massaged the minutes to appear more dovish.
Accordingly, with the December FOMC meeting minutes stale having been rendered stale, and in light of another dreadfully thin economic calendar, attention today should be on his upcoming comments at the Washington Economic Club on Thursday. Given the evolution of his comments over the past several months ((paraphrasing) October: ‘rates a long way from neutral’; November: ‘closer to neutral’; December: ‘balance sheet normalization automatic’; January: ‘policy not on preset course’), confirmation that the Fed has become more sensitive to the “market’s risk concerns” could prove beneficial for global equities and bad for the US Dollar once again.