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Nevertheless, the mighty dollar is still almost 5% weaker in 2016.
I was expecting a risk that the views of a couple of non-voters in the FOMC may be representative of the committee, however Fed New York President William Dudley, a voter, somewhat dismissed the soft April payrolls report in terms of his economic view. He said that the possibility of a double rate hike this year remains a reasonable expectation.
Meanwhile, St Louis Fed president James Bullard, also a voting member, commented that the committee already has an indication of the future policy direction, therefore there is no need to give further indications of it through language on the balance of risks. His comments were relating to discussions on how the Fed communicates with the markets.
The balance of risk assessment has always been an important piece to signal intention, and the lack of it in recent policy statements is probably unnerving market participants. They have to parse other avenues for real-time indication of the Fed’s stance.
Nonetheless, the more hawkish views were responsible for the continued recovery in the USD. It would need more time before the markets come around to the idea of two rate hikes, but for now they are still not convinced the conditions are ready to accept that.
Over the weekend, China reported its trade performance for April. It was a mixed reading. Exports remained in positive growth when you calculate it in terms of CNY, is up +4.1% although slowed from March’s +18.7% surge.
They remained weak in USD terms, shrinking -1.8%, while imports contracted significantly more than estimated at -10.9%. Oil traders may be cheered by the report that oil imports by China, rebounded +3.2% from the previous month due to strong demand from independent refiners.
Yesterday: S&P 500 +0.3%; DJIA +0.5%; DAX +0.2%; FTSE +0.1%
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