FOMC meeting minutes

Yet more all-time highs for stocks in the US last night have led to a stronger open in Europe first thing this morning adding to the momentum that saw the S&P close above the 2,700 level for the first time. The buoyant start to 2018 shows no signs of easing as the good feeling from the US tax reform plan continues to leave traders happy to increase long positions. Energy prices are helping many stock markets higher around the globe as global oil markets also remain strong. WTI crude oil is trading very close to 2015 highs at $62.78 with Brent crude breaking through the $68 mark.

Last night’s FOMC meeting minutes passed with little market impact, as, as expected we saw that almost all voting members voted for a rate hike at last month’s December meeting. Those who didn’t agree with a hike were cautious over the inflation picture, and preferred to monitor the situation ahead of any further tightening. The Fed also discussed the impact of the balance sheet reduction on markets, and the minutes showed that there could well be a more aggressive reduction, and increase in rates if the stimulus added to market conditions started to show over supply.

A lot has been made about global central banks looking to slowdown or unwind bond purchases in 2018, and its potential impact on global markets. Of course current daily record highs are showing no signs of these jitters as of yet. However the Fed projections from December show that the economy could well be looking at up to five rate hikes in 2018. That added to the reduction of the balance sheet in the US, and the slowdown in asset purchasing by the ECB leaves a lot of pressure on the BoJ to pick up the short fall in the bond market, and stave off a global rise in bond yields.

PMI’s are again going to be the major readings to keep an eye on in the UK after better numbers out of the European service sector. Expectations in the UK are for a reading of 53.8, in line with last month’s print. Later this afternoon it will be the ADP payroll out of the US as a precursor to the NFP on Friday that leads the way. Again expectations are for 190K new jobs to be created in the private sector, a better than expected number would get traders excited about a better number on Friday and lead to yet more stock market upside.

The US dollar is relatively unchanged overnight and into this morning with the Fed meeting minutes not ruffling any feathers. EURUSD, and Gold prices have fallen away from important levels hit on the upside over the last 48 hours, with both now settling into flag formations on the shorter term timeframes. Any dollar story is going to be driven by the ADP payroll print at 13:15 this afternoon.

As always, need anything else please let me know.