Dollar recovers but expectations about Fed policy don’t

•     Dollar recovers but expectations about Fed policy don’t

–    Market continues to push out the expected timing of first rate hike

–    Nonethless, dollar recovered against all G10 currencies except GBP

•     Global deflation starting to be a worry as commodities collapse

–    Oil fell further, believe it or not, while copper hit a five-year low

–    All central banks will be subject to the same global deflationary trends. In that context, delay in Fed tightening expectations will be matched by delay in expectations for other central banks. No change in relative position = no change in USD

•     Politics starting to impact the pound

–    Polls give conflicting views, but are consistent:  no party seen winning a majority

–    Political uncertainty could start weighing on the pound

•     CAD is major victim of lower oil prices

–    Weak data (Q4 business outlook DI for future sales much weaker than expected) causes market to price in some modest easing by BoC. USD/CAD headed to 1.20

•     Today:

–    UK:  CPI expected to fall below 1%

US: NFIB small business optimism expected t