What To Expect From FOMC Minutes? Market predictions and reactions - page 12
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Fed's Yellen: Most fed policymakers expect pace of rate hikes will be gradual Reuters with the headlines from a letter Yellen has written in response to points raised
More ... direct quote of the pertinent points:
-She says 'most' policymakers want a gradual rise .... I'd be interested to know who are the ones looking for a rapid rise in rates?
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ADP Employment: What To Expect Private nonfarm payrolls in the US are projected to increase by 179,000 (seasonally adjusted) in November over the previous month in Wednesday’s update of the ADP Employment Report, based on The Capital Spectator’s average point forecast for several econometric estimates. The average projection reflects a slightly lesser rise vs. October’s increase.
The Capital Spectator’s average forecast is modestly below two estimates based on recent surveys of economists.
Here’s a review of the numbers, followed by brief summaries of the methodologies behind the forecasts that are used to calculate The Capital Spectator’s average prediction:
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Fed's Broad Labor Market Metric Slumps The US job market is getting healthier but at a more tepid pace, a fresh look at the comprehensive indicator devised by the Federal Reserve (Fed) showed on Monday.
The Labor Market Conditions Index (LMCI) fell to 0.5 points in November, its lowest point since April, from a revised 2.2 points in October, fresh data from the Fed's Board showed.
Many of the 19 various labor market metrics are released separately beforehand, but the LMCI gauges them to provide a single comprehensive look at the jobs situation.
The monthly jobs report is among the inputs with the highest profile. The November issue showed the jobless rate stayed at seven-year lows of 5%, half of the level it reached after the Great Recession.
The Fed's rate setters are expected to acknowledge the recovery in the labor market, especially the buoyant pace over the past couple of years, with an increase in the target for the policy rate at their meeting next week.
Janet Yellen, the Fed's chair, said last week the US economy will continue to grow at a moderate pace in the short-run and eventually eliminate any residual slack in the labor market which will help bring inflation back to the 2% target.
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Gartman is back on the bear trail as oil dumps again
Dennis Gartman says oil bounces will be short lived and he may be on the right side this time
Last month Dennis Gartman had a bit of a stinker on oil, managing to get stopped out of a short trade. While his trade may not have panned out I did like his execution
He's popped up on CNBC today to say that he doesn't see any bounces lasting and that he should have listened to his own advice
In the last few minutes oil has been on the blink again in both WTI and Brent. It's quite a while after the latest OPEC report earlier so we can't really point the finger there
WTI lost nearly a buck in a few minutes and is now most definitely holding below the 37.70 level, and has found resistance around 37.50. We've also had a test of the 8 Dec lows and managed to grab a handful of ticks under it
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Fed hike probabilities fade on junk bond worries The market is losing faith in next week's Fed hike Jesus spent 40 days in the desert in his moment of doubt.
The Fed had an opportunity to hike rates almost 90 days ago and so far the market has given it a free pass for having its own moment of doubt.
But if the kicking and screaming in the market gives the Fed another moment/months of doubt; the market might lose faith in the Federal Reserve leadership altogether.
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Historic Fed Decision to end the year with a bang
It’s hard not to use superlatives when describing the Fed decision in the US: in the last full week of the year we will probably see the first hike in 9 years. Is it already priced in? Probably not fully. And what’s next? A lot depends on Yellen, the dot plot and the meaning of gradual moves. Apart from the tension towards the event and the aftermath, we also have other events that will impact individual currencies: inflation figures, business confidence and more from all over the world. Video preview of the week:
What To Expect In The FOMC Implementation Note? - BNPP If, as largely expected, the FOMC delivers its first rate hike on Wednesday, it is likely to spell out in a separate document just how it aims to accomplish this feat, notes BNP Paribas.
"The FOMC is expected to issue an implementation note simultaneously with its policy statement on Wednesday at 2:00 PM (EST), to explain the tools and rates it will use to achieve its policy goal. It will likely also include the domestic policy directive issued to the Markets Desk of the New York Fed.
This note is expected to include operational details regarding the suite of tools that will be used to push the effective fed funds rate into the anticipated ¼-to-½% range. After lift-off, it will likely be updated on an as-needed basis, even potentially between FOMC meetings.
Key administered rates are expected to be announced in this document, such as the interest rate on excess reserves (IOER) and the overnight reverse repo rate (O/N RRP rate). It will also likely contain further information about term reverse repos scheduled for 18 December (Friday), 23 December (Wednesday) and 30 December (Wednesday)," BNPP adds.
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Fed's Historic Liftoff and Everything After: Decision Day Guide Here’s what to look for when the Federal Open Market Committee releases its policy statement at 2 p.m. Wednesday following a two-day meeting in Washington.
Economists and traders expect the first interest rate increase since 2006, marking the beginning of the end for the unprecedented era of easy monetary policy. The move would come at a time when a commodity slump is causing the market for high-yield bonds to gyrate, sending tremors through financial conditions indexes and spreading unease across trading desks.
While junk bonds linger as a concern, economic conditions finally point to a much-anticipated liftoff in rates: Recent data show that momentum is holding up, with consistent hiring, solid consumer spending and a modest pace of output growth. Inflation remains below the Federal Reserve’s 2 percent goal, but as officials from China to the euro area try to stoke domestic demand, international risks loom less ominously in the outlook.
There is a scheduled press conference 30 minutes after the committee’s decision is released, during which Fed Chair Janet Yellen can clarify why liftoff from zero is finally warranted -- or, in the case of a surprise hold, why it isn’t. She’ll also be able to lay out a map for future interest rate increases, the next focal point for market participants and economists.
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Here’s Why Rate Hike May Be USD Positive With less than 24 hours to go before the December FOMC announcement, the U.S. dollar rebounded against most of the major currencies. Some analysts attribute the move to a better-than-expected inflation report and an improvement in the Empire State manufacturing index -- but weakness can still be found in both releases. For example while annualized CPI growth increased from 0.2% to 0.5%, prices stagnated on a monthly basis. Although the Empire State index rose to -4.59 from -10.74, the index remained in contractionary territory for the 5th month in a row. So why is the dollar rising pre-FOMC if Tuesday’s U.S. economic reports leave much to be desired? The answer is positioning.
The biggest lesson learned from the short euro ECB trade is that crowded trades can turn into a big mistake -- even if fundamentals have not changed. Early this month, the ECB cut interest rates and extended its QE program. Instead of driving EUR/USD to parity, the move sparked a 5-cent short-covering rally in the currency. For most of this year, investors were long dollars and after the ECB meeting, they pared their positions on the fear that the long USD/JPY trade would also run out of gas because the most popular view for FOMC is that the central bank would raise interest rates and follow with dovish guidance.
The most disruptive move that the Federal Reserve could make Wednesday is to leave interest rates unchanged. But the chance is extremely slim because keeping monetary policy steady would undermine their credibility. So the only-out-of-consensus view that needs to be taken seriously is a rate hike and strong forward guidance. Most investors expect another 25bp to 50bp rate hike from the Fed next year so it would not be out of the realm of possibility for the central bank to signal that the next rate hike could occur before summer. Any specificity in the central bank’s guidance would be viewed as positive for the currency while ambiguity would be viewed as negative.
Pre-FOMC: Time To Hike – SEB Towards the all important Fed decision, here is a preview from SEB, that covers the main points.
Where will the US dollar stand afterwards:
Here is their view, courtesy of eFXnews:
LIFTOFF ALMOST GUARANTEED. In all likelihood, the Fed will raise the fed funds rate by 25 basis points thus taking the target range to 0.25-0.50 per cent at the meeting that concludes on 16th December. Markets are pricing in a very high probability of liftoff; while the chance of a 25 basis point hike is 76 per cent according to futures the hike may well be fully priced since a 25 basis point hike may actually raise the Fed funds rate by less due to excess liquidity in the system. Most Fed watchers see liftoff too; only 3 of 101 expect unchanged interest rates according to a Bloomberg poll.
UNANIMOUS DECISION? While Chair Yellen certainly would like a unanimous decision at such an important meeting, she may not get it her way. In our view it is Chicago Fed’s Charles Evans who is the most probable dissenter, but since he will not have a vote in 2016/17 the implications for future policy would be minimal. Evidently, Fed governors Tarullo and Brainard are leaning in dovish directions too but neither of them has actually dissented in the past. It is also good to know that while Governors voting against the majority are not unprecedented, one has to go all the way back to 2005 to find the last time that happened. Evidently the dovish Minneapolis Fed’s Kocherlakota, who most likely was the one who wanted a negative Fed funds rate back in September, will not attend the December meeting and will be a non-voter in 2016.
DOVISH PRESS CONFERENCE. At the press conference we expect the Chair to provide a dovish message further underlining the gradual nature of this tightening cycle – which stands in sharp contrast to the “measured pace” language and the series of hikes in 2004-2006 for example. To further back up that message, it is our impression that markets are looking for cuts in the median Fed projections to, say, 1.125 per cent by end-2016 and 2.375 per cent by end-2017. But in our view the surprise potential here is for unchanged dots, at least as far as 2016 is concerned. While markets initially may respond negatively to largely unchanged dots, in our view the press conference is much better suited to get the dovish message across in any event. Look, the dots are not known by the Chair in advance since they are submitted before the meeting begins and as such they are not reflecting any consensus-building efforts.