In a tribute to one of the great comediennes of modern times–and no I am not being RIDICULOUS–the FED meeting will result in an homage to the early cast of Saturday Night Live. On the “Weekend Update” segment, Gilda Radner would do her shtick with Jane Curtin and end with, “Jane, I tell you it’s always something.” This is what Chair Yellen will reveal tomorrow. In an effort to stall another rate rise the FOMC will cite several possible headwinds facing the U.S. and global economies. The U.S. DOLLAR will be a concern because in the Sara Eisen interview with Vice Chairman Stanley Fischer he revealed that the FED did consider the DOLLAR in its decision-making.
The BREXIT issue will be noted as a possible headwind going forward as the fallout from a slowdown in the U.K. is a definite unknown. The recent improvement in June’s employment data will be noted but the growth in second jobs has been comparatively weak to the previous two quarters so a slowdown may be imminent. The second quarter GDP will not be released until Friday so no jump in second-quarter growth will be pressuring the FED to move at this meeting.
The market will be listening for forward guidance and a rate rise at the September meeting. If the traders deem a September rate rise as a possibility I would look for the yield curves to flatten, the precious metals to sell off and the DOLLAR to strengthen. However, the issue will be if the price action can be sustained. Be patient and let the market digest the impact of the price-driven algos. The FED certainly has the “cover” of the global equity rally as an inducement to raise rates but central banks are always in search of the HEADWIND DE JOUR. Janet, I tell you, it’s always something.