FOMC Minutes & ISM Manufacturing – A Preview


The Federal Open Market Committee (FOMC) minutes of the December 10-11 meeting are due later today (19:00 GMT). The report should reiterate that policy and the economy are in a “good place.” That’s the Fed’s new mantra as it enters 2020, having shifted gears in 2019 to easing from a tightening stance in 2018, and now is on the sidelines monitoring conditions. The Committee voted unanimously 10-0 at last month’s meeting to leave the rate stance unchanged and to indicate that the policy stance is “appropriate.” Hence, the report shouldn’t show much disagreement among the members. Growth looks solid and downside risks have been moderating. However, one aspect of the meeting will be of interest will be the dots where four members penciled in a rate hike in 2020. But, it is understood that, that view did not have a lot of traction. Chair Powell even said don’t dwell on individual estimates (miss the forest for the trees) and has indicated a tightening isn’t in the cards until inflation hits the 2% goal on a sustained basis. While there have been some increasing pressures in some measures, it doesn’t appear the Fed is too worried about prices yet. The Fed, at the moment, is set on a “No Change” 2020 following two years of ups and then downs for interest rates, save the geopolitical backdrop, which deteriorated significantly earlier today.

US ISM manufacturing index fell to 47.2 in December from 48.1 in November. It was at 54.3 a year ago. The employment component dropped to 45.1 versus the prior 46.6. Production fell to 43.2 from 49.1. New orders were weaker at 46.8 from 47.2. New export orders edged lower to 47.3 versus 47.9. Imports were slightly firmer at 48.8 from 48.3. Prices paid climbed to 51.7 from November’s 46.7.

The Dollar fell following the much weaker manufacturing ISM outcome, which saw EURUSD rally from 1.1150 to 1.1165, while USDJPY fell from 108.25 to 108.06 lows. Of all the forex pairs we monitor USDCAD had the most unusual 2019. It traded at its highest point (1.3661) on the first trading day of the year (January 2) and at its lowest point (1.2950) on the final trading day of the year (December 31). Recent highs and lows of 1.3010, and 1.2950 should hold up for now.

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Stuart Cowell

Head Market Analyst

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