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Fed's Powell Confirms More Cautious Policy Path. Brexit Worries Persist

13 Years ago | December 02, 2018 12/2/23, 12:00 AM

John M. Bland, MBA, co-founder,

Fed Chair Powell Reinforces Perceptions Of A Less Hawkish Fed Policy Posture After some initial skepticism, I have turned supportive of Fed Chair Powell. What has turned me around has been his real world experience. His approach has been striking me as more pragmatic than the dogmatic approach of the academic Fed economists. I have been favoring a policy pause by the Fed here for several months now. Instead, the more academically inclined members of the Fed policy board seemingly have been hell-bent on a policy normalization at any cost. Recently, there have been hints by Chair Powell that the economy might be starting to face some headwinds and that a pause in the tightening path might make sense until the outlook is clearer. Powell said that the impact of recent rate hikes is uncertain and it might take year or more to assess the impact of rate hikes. I am now expecting a more traditional data-dependent policy approach in the period ahead. In so doing Powell has effectively just about completed the Fed policy normalization ahead of schedule. All that remains is for the central bank gradually to reduce the size of its balance sheet. That will come in due time. Following the Wednesday speech by Chair Powell, odds for a December rate hike increased moderately and the yield on the 10-yr note held about steady at 3.07%. Markets also priced out one of the 0.25% rate hikes expected in 2019.

Brexit Story Refuses To Fade Forex markets continue to be buffeted by headlines from the Brexit discussions between the U.K. and EU, and within the U.K. The current consensus view is that the May Withdrawal Agreement with the EU was dead on arrival In London. One press source reported on Wednesday, that as it stands now the May agreement will fail by around 200 votes. That would be a crushing defeat. There was word Tuesday that May had been told that the vote has no hope in the House of Commons. As a result there were reports that as a result she has decided to open to open the bill to amendment when it is debated in Commons. Currently, that vote is scheduled for December 11. Of course, when it comes to Brexit, everything is subject to change. Expect more volatile trade in the GBP, with its downward bias, to continue vs the USD and EUR until there is some sort of resolution comes into view.

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 3 Dec 2018
A All Day Final Mfg PMIs
Tue 4 Dec 2018
A 04:30 AU- Reserve Bank Decision
Wed 5 Dec 2018
A All Day Final SVC PMIs
A 04:30 AU- CPI
A 13:15 US- ADP Jobs
A 13:30 US- Productivity
A 15:30 US- EIA Crude
B 19:00 US- Beige Book
Thu 6 Dec 2018
AA 12:45 EZ- ECB Decision
A 13:30 US- Weekly Jobless
Fri 7 Dec 2018
A 10:00 EZ- GDP
AA 13:30 US- Employment/Trade
A 15:00 US- Final Univ of Michigan 

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