Fed minutes smack US dollar while strengthening gold

New York (Jan 10)  US – Fed minutes provided a more dovish outlook on the future of monetary policy decisions, the latest FOMC meeting minutes showed.

• The officials agreed that “some further gradual increases” in the federal funds rate would be appropriate.

• While minutes highlighted that future decisions will be data dependent the rhetoric seems to have softened compared to four hikes in 2019 widely expected only a few months ago.

• The committee argued that the FOMC “could afford to be patient about further policy firming”, which comes in line with Powell comments last week.

• “Nevertheless, this doesn’t mean the Fed is done raising interest rates… the minutes note the “contrast between the strength of the incoming data on economic activity and concerns about downside risks evident in financial markets”…we still expect the Fed to hike its policy rate up to twice more in the first half of this year,” Capital Economics commented on the news.

• The government and Democratic Congressional leaders standoff continued as Trump is reported to have walked out of shutdown meeting.

• President later confirmed he had cut the meeting short, declaring it “a total waste of time”.

• US futures equities are trading weaker this morning as initial optimism over the start of US/China trade talks waned and investors were looking for tangible results from negotiations.

 S&P 500 Index futures are down 0.6% today marking the first decline in a week.


China – Slowing inflation reflects a recent drop in oil prices while also offering authorities room for manoeuvre to support economic activity.

• Core inflation that excludes food and energy held steady at 1.8%yoy.

• CPI (%yoy): 1.9 v 2.2 in November and 2.1 forecast.

• PPI (%yoy): 0.9 v 2.7 in November and 1.6 forecast.

UK – The government will have three days to come with a Brexit “Plan B” should May deal get voted down next week, Parliament rules.

• This cuts the previous 21 days period with many MPs suggesting PM will not be able to run down the clock to 29 March to try to bounce those against a no-deal Brexit into supporting her agreement in another vote.

France – The second largest economy in the eurozone shows signs of weakening growth with industrial production posting a third consecutive annual decline in November.

• Two days after Germany reported weak industrial production numbers raising concerns it may be heading towards a recession, France posts a surprise 2.1%yoy drop.

• While declines were relatively brad based, energy sector recorded worst drops affected by protesters blocking various sites during the demonstrations.

• The “yellow vests” protests have erupted in mid-November as a protest against a fuel tax but has developed into a broader backlash against the government.

• Industrial Production (%mom/yoy): -1.3/-2.1 v 1.3/-0.6 in October and 0.0/-0.2 forecast.