Saturday January 7, 2017 - 10:58:10 GMT
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Bank of China Actions To Stabilize the Yuan Weighing On USD
John M. Bland, MBA
Fed Policy Minutes send conflicting messages
The two most salient items in their notes seemed to be that they feel that increased fiscal stimulus by the incoming Trump administration should likely cause the FOMC to raise its economic growth forecasts. That suggests that the future path for interest rates might have to be adjusted higher. They also worried that a higher USD could be a restraint on inflation. Since the Fed targets employment and inflation, consistently missing to the downside its inflation target could be force them to hold the line on an aggressive tightening of monetary policy. As the dust settled following the meeting, the markets seemingly were reading the statement as mildly hawkish.
Peoples Bank of China a New Element in forex trade
Recent weeks have been seeing heavy forex intervention by the Peoples Bank of China (PBOC) in the Chinese yuan to combat large capital outflows from China and to strengthen the currency have been generating havoc in the forex markets. The activity has undermined USD weaken vs. the EUR and hurt the JPY as well. As in the case of the SNB fiasco, foreign governments are not likely to be pleased with this state of affairs and may want to have words with the PBOC about being a source of market instability.
Current Market Conditions
The final employment reading of the Obama administration had mixed data with payrolls after revisions mixed and Average HOurly earnings making back a decline registered in November. On balance, equity markets read the data as mildly positive. The focus of the forex market has mainly been on the intervention activities of the PBOC, which indirectly have been impacting the USD.
Following an active calendar in the first week of the new year, the pace of releases in week ahead will slow. Major highlights include: a Bank of England policy decision on Thursday and U.S. Retail Sales data on Friday.
WEEKLY HIGH IMPACT NEWS:
No Major Data
0:30 AU- Retail Sales
09:30 GB- Industrial & Manufacturing Output
09:30 GB- Trade
15:30 US- Crude
12:00 GB- Bank of England
13:30 US- Weekly Jobless
02:00 CN- Trade
13:30 US- Retail Sales
13:30 US- PPI
15:00 US- University of Michigan
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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