US Federal Reserve

Despite a more hawkish-than-expected Fed minutes, investors appeared to be reducing exposure to the USD (modestly as EURUSD briefly tagged above 1.05 and buying bonds across the curve (with the belly outperforming) to start. However, that quickly reversed and left stocks mixed with banks just green post-Minutes, and the USD limping higher.

The initial reaction to the hawkish Fed minutes was the ubiquitous VIX slam which sparked algo buying panic running stops above the opening Dow highs...

Since The Fed decided unanimously to hike rates in mid-December, bonds, banks, and bullion are best but the broad stock market is lower. The key area of today's minutes was on the impact of Trump's policy agenda (which was the focus of Yellen's press conference), and they did note that there were "upside growth risks from fiscal policy" and this might mean Fed "needs to raise rates faster."

While US equity prices push ebulliently towards their next level of Nirvana, financial conditions continue to tighten for American businesses.

For the first time since April 2009, 3-month LIBOR - one of the most important reference rates for business financing - topped 1.00% today.

We documented the real world implications of this in "Forget The Fed’s 0.25%, Short-Term Rates Have Already Risen By 1% For The Real World"

Submitted by Peter Schmidt via The Mises Institute,

What is Janet Yellen thinking?

The Yellen Fed raised interest rates again in December 2016.

More than this, Yellen has promised the Fed will be raising rates THREE times in 2017.

This is astounding when you consider that the Fed is promising this at a time when the $USD is at a 13-year high.

Janet Yellen is playing a very dangerous game here. There is simply no logical explanation for what she’s doing here It’s madness.

A strong $USD hurts:

1)   Corporate profits (47% of corporate sales from abroad).

2)   GDP growth.