Thursday January 10th, 2019

The Fed Minutes yesterday at 2pm confirmed to the market that there has been a moderation in the Fed’s tightening policy. The USD dollar sold off sharply and while it may be over done in the short-term it’s important for business owners everywhere to realize that future rate increases that were once considered to be a forgone conclusion will now likely be delayed. As a result the game has changed and business owners might wish to adjust their hedging programs accordingly. Specifically the Fed stated that “…Concerns over escalating trade tensions, global growth prospects, and the sustainability of corporate earnings growth were among the factors that appeared to contribute to a significant drop in the U.S. equity prices….”  With the Fed stating its concerns including that due to low inflation it can be more patient over future rate hikes the Fed appears to have affirmed that Trump was correct in his criticism of Fed policy. The USD sold off on the news and over the longer term business owners can expect a more friendly Fed, which means a general decline in the USD, a stronger stock market, stable to lower interest rates and strength in gold. Today look for a retracement of the sharp dollar weakness that occurred yesterday. CAD is correlated to oil and the Fed comments are bullish of oil, so USD/CAD should continue to strengthen as it has over the few days. US Jobless Claims are due out today and while there has been  general trend since the 2008 financial crisis of lower claims over the past few weeks the numbers have rebounded sharply. The general expectation is that they should be higher again due to the recent government shutdown over the border wall, so any weakness from last weeks 231k will be a surprise.