Wednesday, January 9th, 2019

The market is very quiet this morning in anticipation of the FOMC meeting minutes to be published at 2PM today. The market is looking for confirmation of Fed Chairman Powell’s recent comments that the Fed will be adjusting its on-going policy of rolling off its multi-trillion dollar asset portfolio accumulated to support the 2008 financial crisis along with rate hikes. If the comments indicate in any way that current policy is unchanged then look for a sharp reaction towards USD strength. The Trump administration has been critical of the Feds recent rate hikes that have unnecessarily hurt the economy at a time of low, declining inflation and strong employment. However the Fed is concerned that as Trump’s tax cuts flow through the economy inflation will be reignited. Traditionally the Fed policy was based on data evidence which meant that policy shifts lagged the economy as data collection took time to collect. This is the Fed’s attempt to be more proactive and visionary. This is the defining issue regarding fiscal and monetary policy that will affect the dollar, interest rates, and the stock market setting up potential further clashes with the Trump administration and Powell. This is despite the fact that Powell was nominated by Trump over Yellen in an attempt to ensure a looser pro-growth policy direction for his administration.