Thursday, October 9, 2014

FOMC minutes are surprisingly dovish

•     FOMC minutes are surprisingly dovish
–    FOMC members emphasize risks to the outlook, such as stalling Eurozone economy, slow recovery in housing construction, and underutilization of labor
–    Minutes suggest no rush to raise rates, in contrast to higher forecast in “dot plot”
–    Fed funds expectations collapsed
•     FOMC also expressed concern about USD
–    Worried that further appreciation of USD could hurt US exports, exert downward pressure on inflation and make it harder to hit their inflation target
–    Contrast with Treasury Secretary Lew’s comments in favor of a strong dollar
•     No press conference after October FOMC meeting
–    Means we won’t get any full official clarification for some time
•     Conclusion:  dollar to remain volatile, may be further weakeness
•     Today:
–    Eurozone: German trade surplus expected to decline slightly
–    UK:  BoE MPC meets, no change likely, as usual should be a non-event
–    US: Initial jobless claims

–    Speakers:  ECB’s Draghi & FOMC’s Fisher speak in Washington; other ECB members and Fed officials speak as well

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