Hawks demand more!

Minutes of FOMC Meeting from 12-13 December 2017 was released last night. MSM wants us to think the Fed is hawkish*.


Reminds me of what I wrote on 02 Jan ‘Odds of a Fed rate hike in March-May 2018 got better‘ when I observed that the CME FedWatch Tool indicates rising odds of a March-May rate hike

Compared to odds recorded on 14 December 2017 – day after the last FOMC meeting – probabilities captured today show odds for a March-May rate hike improve over 10%.

At some point in the near future, expect Dollar action to align in the same direction with MSM coming in with an appropriate cover story.

This may be that story.


CME FedWatch Tool probabilities day after minutes

CME FedWatch Tool screenshot taken on 04 January 2018

CME FedWatch Tool screenshot taken on 04 January 2018

This is a screen capture of the CME FedWatch Tool today which shows probability of a March 2018 25 basis point rate hike rise another 10% to 67.5%.


My interpretation

This table can be interpreted this way:

  1. Rising odds of a March – May 2018 rate hike by 25 basis points.
  2. Rising and nearing 50:50 odds of another 25 basis points by June.
  3. Probably there is one if not two hikes in 2018.
  4. Positive odds of a third hike in 2018 but not better than 50% probability (unlikely).
  5. Odds exist for a rate cut in 2018.

To justify, I see odds above 50% as ‘likely’ and below 50% as ‘unlikely’.

Therefore odds of one hike in 2018 as likely, odds of two hikes improving but unlikely, three hikes are unlikely and a rate cut is unlikely.

This justification works for me. Anyone can interpret in ninety-nine other ways.

Technically DXY is still in down trend over multiple time frames but approaching 52-week low. So a rebound in the Dollar in line with MSM report is quite convenient.

DXY weekly chart from October 2014 - present

DXY weekly chart from October 2014 – present | Source: Tradingview.com

*Central banks want us to believe that they set interest rates but there is evidence that they are followers of market driven yields.

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