EUR, AUD, NZD, JPY, Fed 2016 to 2017

Next post is a long review to Yellen as well as 2016 and 2017 Fed Monetary Policy. Yearly monetary policy is established every January as this meeting represents the Fed’s organizational meeting. Tweeks to policy are done if needed in the middle of the year such as Yellen’s increase to QE around May 2015. Tweeks or changes to monetary policy won’t be seen in the OCT / Sept period traditionally as this time represents not only budget time for the US but the Fed’s Yearly investments are recommended and implemented at this time.

Yet this time doesn’t stop deeply conservative, deeply ideological Yellen to warn against tax cuts. Its impossible for Yellen to overcome her deeply ingrained Keynesian disposition. Given a full Fed board of Keynesians against the same shared ideological dispositions, Board member votes become an exercise in Irving Janus groupthink as Keynesians all vote as 1 solid block.
Given a negative or positive view to life and economics, ideological predispositions always chooses negative and this negative view is what stopped economic progression over years as Keynesians abilities just can’t move forward. It took 1 year to raise Fed Funds in 2015 and this is just one example of many meanwhile Fed Funds traded 0 to 1/4.

Here’s 3 examples. The weather and hurricanes are back to explain low GDP. Obviously its been raining and cloudy over the past 9 years with 2% GDP. Given small numbers in unemployed persons Vs the vast majority employed, which way is the focus. The positive majority employed or negative small numbered unemployed. Kook ball Yellen took unemployed to a new low. How about new Inflation Language. Sure looks and sounds like Canada’s October 2016 revamp of Inflation targets in ranges. Yellen’s message is i’m trying to balance negativity against mandates to move forward and I’m struggling.

If GDP hit 5% today, the message would be negative. Negative explains why EUR rises on every Fed statement.
Yellen and the Keynesians in post 2008 are the Arthur Burns of our time. If markets were allowed to function on their own without the spookiness in Fed tools, where would markets trade today. Yet the negative in Yellen and Keynesians were balanced against her overall economic approach.

Fed Statements are defined as policy as opposed to law. The majority vote implements policy yet a majority vote may rescind policy. Once policy is voted, its written in the statement and reported month after month using exact same words. An activist Fed against new policies increases the number of statement pages. No policy changes means Statements are reported as the same document every month, same words, same everything.

Statement commonalities for market moving purposes month after month, decade after decade, reports Inflation and Fed Funds up or down then economy good or bad. Fed Minutes are statements yet restated but stated succintly using same words, same old document reported month after month. Statements are market moving documents rather than minutes because a statement might contain new information.

Criticism to those reporting on 1 statement as this represents 1 moment in time and its meaningless pablum respectfully, as the full Fed statements over time must be seen to understand the Fed’s approach, philosophy,, orientation, tools. We’re dealing with Keynesians and to their credit, they provide crystal clear roadmaps. The statement may report for example Fed Fund raise probabilities but gazillions of prior statements reveal probabilities to the Fed board is meaningless information. The current Fed statement reports 87% probabilities to a December Fed Funds rise. Severe caution is warranted as this probability report has been seen time and time again. June 2015 is just one of many examples.

The view overall appears as 2016 and 2017 has been a good ride for the Fed against only minor, minor changes. The EUR was hit in July 2017 by Fed policy but this is unclear so far to the what question.

EUR/USD. Overall break points, 1.1796 and 1.1681. Bottom sides continues to rise and its the line to watch. A break of 1.1879 targets low 1.1900’s while 1.1821 provides the support point.

AUD/USD. Overall break points are close at first 0.7682 then 0.7832.

NZD/USD. Overall break points are located at 0.6989, 0.7125 and further out, 0.7271.

USD/JPY break points 111.61 and 112.25.

 

Brian Twomey

 

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