FED: Powell: Need To See How Trump Policy Plays Out; No QT News (3/3)
As largely expected, Powell steered clear of any conclusions on Trump administration policy. Asked about public comments from President Trump "demanding" the Fed to lower rates, he declined to answer, saying that he's had no contact with the White House. He noted that the Fed staff provided macroeconomic scenarios from
- On tariffs, he said that the range of possibilities is very wide, "we don't know how long, how much, what countries", about retaliation, or how it will transmit to consumers.
- Powell says there's nothing in the data yet to show an impact from immigration policy shifts under the new administration, but there are anecdotes of nascent labor shortages in sectors such as construction. Additionally he speculated the recent fall in immigration flows may be offset by slower job creation, lowering the "breakeven rate" at which raw payroll gains produce higher unemployment.
- Powell did acknowledge regarding inflation expectations that "you see expectations moving up a little bit at the short end, but not at the longer run, which where it really matters...and those could be related to... some of the new policies ... where the committee is very much in the mode of waiting to see what policies are enacted."
- On this point, Powell promoted a patient approach: "kind of not be in a hurry to to get to a place of understanding what our policy response should be until we see how it plays out."
- On broader labor market risks, Powell pointed out that there's a low hiring rate, so if layoffs rose, then unemployment could rise quickly. But overall he characterized the labor market as solid, even if "we don't think we need it to cool off anymore."
- While MNI had thought the FOMC would discuss balance sheet policy at this meeting, that didn't seem to be the case although we will have to wait for the minutes in 3 weeks' time to be sure. Powell said simply that the most recent data show bank reserves are still "abundant" with the Fed funds rate steady, but he had "nothing to say about particular dates" on ending QT - "as always we stand ready to adjust policy in light of economic and financial developments."
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USDCAD TECHS: Bullish Flag Formation
- RES 4: 1.4578 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4388 @ 16:13 GMT Dec 30
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4269/4093 20- and 50-day EMA values
- SUP 3: 1.4011 Low Dec 5
- SUP 4: 1.3928 Low Nov 25 and a key support
USDCAD bulls remain in the driver’s seat and the pair is holding on to the bulk of its recent gains. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4269, the 20-day EMA. A pullback would be considered corrective.
US: CME Early Close for January 9 Day of Mourning to Honor Pres Carter Passing
- While the NYSE Group markets will close in observance of the National Day of Mourning for President Carter (New York Stock Exchange, NYSE American Equities, NYSE American Options, NYSE Arca Equities, NYSE Arca Options, NYSE Chicago and NYSE National), the CME Group has opted for early close, link HERE
- FI open outcry will close at 1300ET, GLOBEX shortly after at 1315ET.
- More to follow, but economic data expected that day is likely to proceed as normal (weekly jobless claims at 0930ET, Wholesale trade & inventories at 1000ET).
- Treasury auctions scheduled for January 9 remain uncertain (4- & 8W bills at 1130ET, 30Y bond re-open at 1300ET).
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6444 50-day EMA
- RES 2: 0.6384 High Dec 13
- RES 1: 0.6274/6323 Low Dec 20 / 20-day EMA
- PRICE: 0.6216 @ 16:12 GMT Dec 30
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
AUDUSD bears remain in the driver’s seat and the pair is trading closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6323, the 20-day EMA.
