We are looking at a bunch of data out of the US and ignoring the fact that the weather channels freaked us out for no reason about the “historic” snow blizzard that was supposed to hit the North East last night… 2 inches! Back in Iran we would get two meters of snow and still go to school. What can I say, US media LOVES to create drama.
New York session started with another disappointing piece of data: US durable goods orders down 3.4% in Dec vs. up 0.5% expected. The news brought more confusion into Ms. USA and more anticipation about the upcoming FOMC statement as forex traders are eager to find out what the chances are of seeing Fed tightening sometime this year.
In their previous FOMC statement, Fed-head Janet Yellen still decided to retain the “considerable time” wording when it comes to discussing how long they plan to keep interest rates low but also added that they “can be patient” in considering policy normalization. Talk about giving mixed signals!
Minutes of that December meeting revealed that Fed officials are very concerned about weakening inflationary pressures, which led them to predict that a rate hike before April is unlikely. Policymakers also reiterated that they’d like to see core inflation, which currently stands at 1.4%, move closer to their 2% target before making monetary policy changes.
Fed officials did acknowledge that they are seeing some strength in the domestic economy, but these could face some troubles.
In a nutshell, these risks might lead Fed officials to stick to their cautious stance in their upcoming policy decision. Their actual statement is still likely to contain the dovish “considerable time” phrase, which could be balanced out by slightly hawkish comments on being “patient” with potential adjustments. In this case, the U.S. dollar might still be able to stay strong against its forex counterparts, as most economies have been faring worse and other central banks have opted to ease monetary policy.
Of course this scenario has already been widely anticipated for quite some time, and the lack of any additional clues from the Fed might not spark much action among dollar pairs.
Coming up today we have CB Consumer Confidence and New Home Sales data release on the economic gossip channel.
Do you think Yellen and friends will have any surprises for us this week?