US Dollar Steady Ahead Of January FOMC Meeting; US-China Trade Talks

The US Dollar (via the DXY Index) has gained modest ground in the run-up to the Federal Reserve’s January policy meeting amid offsetting moves in the British Pound (slightly higher) and the Euro (slightly lower). Headlines regarding the Brexit negotiations continue to pour out, although it’s becoming difficult to see a path forward from here if the EU’s position is that the UK can’t renegotiate its Withdrawal Agreement.

Elsewhere, US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He are meeting in Washington in order to find a way to avoid the next round of tariffs being imposed at the start of March. As it stands, the 90-day détente ends on March 1, and on March 2, tariffs on $200 billion worth of US-imported goods from China. After the arrest and publicly declared intent to prosecute Huawei CFO Meng Wanzhou, it makes sense that the current talks might not be that productive at all.


The Federal Reserve has had a bit of a communication problem the past few months, and the January FOMC meeting may be the first effort to clear up any misunderstandings.

It’s important to recall the evolution of Fed Chair Jerome Powell’s commentary in recent months. On October 3, 2018, he indicated that be believed that ‘rates are long way from neutral,’ implying that many more rate hikes were coming. Then, on November 28, he seemingly hedged, saying that ‘rates are close to neutral,’ implying that the Fed was nearing the end of its hike cycle. At the FOMC meeting on December 20, the Fed’sglide path of interest rates was reduced. Most recently, on January 4, Fed Chair Powell said that he was ‘open to changing normalization,’ in effect striking the Powell Put.

Normally, a January FOMC meeting wouldn’t give the opportunity for the Fed Chair to clarify his prior remarks in a ‘live’ setting. Starting this week, all FOMC meetings moving forward will feature a press conference by the Fed Chair, whereas previously, press conferences were only held at the quarterly meetings that produced a new Summary of Economic Projections. In theory, this makes the January meeting ‘live.’

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