Well, we’re less than one hour away from the release of the October Fed minutes. Who’s excited?
Despite the fact that the October NFP print came after the FOMC meeting, market “bird watchers” will still be keen on parsing every last word for hints around what the very “data dependent” Fed may or may not announce next month.
More specifically, it will be interesting to see if the minutes confirm the notion that Janet Yellen is leaning hawkish (to the extent that we can call a symbolic 25 bps hike “hawkish”) and whether the statement might have come across as more committal than the Fed actually is vis-a-vis a 2015 liftoff.
For their part, Deutsche Bank thinks the market may have read too much into the October statement. “Remember that the hawkishness of the statement that followed that meeting was the start of a big swing in December liftoff expectations. In fact, prior to that meeting December hike expectations were sitting at around 35%, before rising to 50% or so immediately after the statement. Currently we’re sitting at 66% which is just shy of the 69% high point earlier this month,” Deutsche notes, adding that the minutes could be “more balanced and much less committed to a December hike than what was inferred from the October communiqué.”
[5]
And to the extent the committee cares about data (as opposed to more “important” things like China, EM, terrorism, and, critically, weather), Deutsche also notes that “there is a lot of data left between now and the December 15th/16th meeting (including the November payrolls number) and while the latest employment report was encouraging, our colleagues note that growth and inflation numbers could be slipping given the latest retail sales and import price figures.”
Traders will likely also be interested to see if it's possible to discover anything about the trajectory of rates once the Fed does finally take the plunge. For reference, here's Goldman's best guess as delineated earlier this month in a note outlining [6] the expected "flight path":
[7]
Finally, the minutes will be scrutinized for any signs of disagreement, divergence, or fist fights in an effort to determine how united the committee is around the commitment to start the normalization process (or not).
Of course this is all just speculation. We'll get the official interpretation from Jon Hilsenrath about 45 seconds after the minutes hit the wires.
You know the drill: watch USD, watch USTs, take whatever stocks do with a grain of salt, and don't forget to laugh...
