“Waiting too long to tighten would be unwise; more policy adjustments will likely be needed if the economy remains on track.” A number of Fed officials chimed in Tuesday and Wednesday to reinforce Ms. Yellen’s message that they expect to raise short-term interest rates in coming months, perhaps as soon as March.
U.S. President Donald Trump pledged on Friday to announce a “phenomenal” tax reform. The first three weeks of the Trump administration did not align with the pro-growth agenda, favoring instead an “America first” protectionism which have weakened the USD. Fed Chair Janet Yellen will testify before the Senate Banking Committee on Tuesday; her take on the U.S. economy will be followed closely by investors.
For anyone looking for significant clues to the future of Fed policy, yesterday’s FOMC statement was a real letdown. The announcement mostly reflects U.S policy makers’ caution in a time of political upheaval. Nevertheless, the Fed indicated that they remain on track to gradually raise short-term interest rates this year.
After pulling out of the Trans-Pacific Partnership, Trump has signaled his desire to renegotiate US participation in the longstanding North American Free Trade Agreement. This only adds to near-term uncertainty for the Mexican Peso. What does this mean for companies with cash flows exposed to the peso?
The dollar is mixed against majors after the inauguration of President Trump. The markets did not get enough information on Friday to support the dollar as the tangible pro-growth agenda items were missing from the event. Trump’s speech was delivered in his combative style and he made a pledge to put America first. The protectionist message did not resonate with markets as the dollar and stocks fell.