Today, trading will resume in the US markets following a day of mourning for former president Ford. So, trading start the new year only today, but with an extremely busy and important calendar that contains the December ISM, car sales and ADP employment
report, the construction spending figures for November and the Minutes of the December 12 FOMC meeting.

The market expects the ISM to have risen marginally to 50 from 49.5 previously. The various regional surveys point in different directions. The NY Fed survey and the Chicago PMI showed quite good readings, but the Philly Fed and Richmond surveys
printed a picture of very weak activity in those regions. We suspect the Chicago PMI benefited from extreme clement seasonal (which are much less a factor for the ISM) and so are not impressed by the gains the survey showed in December. Therefore,
we put ourselves on the bearish side of consensus. If the ISM remains below 50, it would be the second consecutive month activity contracted in the manufacturing sector and should support Treasuries.
Read the rest of this entry »

Expectations continue to build that the Federal Reserve will pause its rates tightening cycle in August, this will result in Forex traders cutting their long USD positions.

The latest release of minutes from the Federal Open Market Committee meeting (FOMC) revealed that Fed officials are uncertain about the future interest rate direction and are concerned about short term inflation.

Forex Investors reacted to the release of minutes from the FOMC by continuing to reduce their USD holdings, this saw the Euro rise to a high of 1.2650 USD overnight from 1.2590.
Read the rest of this entry »

The US Federal Open Market Committee unanimously decided to raise interest rates by another 25bp during last week monetary policy meeting, taking the fed funds rate to 5.25%. More interestingly, the statement language was a notch more dovish than expected. While the FOMC does not promise anything for the August meeting, the overall message is still that near-term monetary policy remains data dependent, the FOMC is still vigilant on inflation and has retained its tightening bias.
Read the rest of this entry »