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The greenback hits session lows across the board following the dovish tilt to the FOMC minutes, with the takeaway being members seemed in less of a hurry to hike rates than the spin following the policy statement and Yellen press conference that day in mid-March.
Higher on the session are the euro (FXE +0.4%), pound (FXB +0.1%), swissie (FXF +0.1%), aussie (FXA +0.2%), and loonie (FXC +0.4%). Flat on the session after being down earlier is the yen (FXY -0.2%).
"The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions," says the FOMC cutting QE another $10B to $55B per month.
Updating its economic projections, the central forecast for headline unemployment at year's end drops to 6.1%-6.3% from 6.3%-6.5% expected last December. Core PCE inflation remains at 1.4%-1.6%.
13 of 16 members expect the first rate hike next year, with 10 seeing a Fed Funds rate of 1% or higher by the end of 2015.
Treasurys are taking hard the news of faster and sooner rate hikes, the 10-year yield up eight basis points to 2.75%. TLT -0.8%. Gold takes it hard as well, -1.9% to $1,334 per ounce. GLD -1.6%, but the dollar (UUP +0.6%) is higher across the board.
A check of Eurodollar futures finds nearly a full additional 25 basis point rate hike getting priced into the 2015 and 2016 contracts that wasn't there 20 minutes ago.
A check of asset markets following what's currently being interpreted as a strong nonfarm payroll report (175K jobs added vs. 154K expected; UE rate up to 6.7%): Flat ahead of the number, stock index futures are up by 0.5%; gold is down 1.1%, silver down 3.2%, copper off 2.9%; the dollar is up a bit, but mostly against the loonie after a weak jobs number in Canada.
A check of currencies amid the Ukraine military tension finds money flowing, but not flooding, into the greenback. The dollar is +0.2% vs. the euro (FXE), +0.1% vs. cable, +0.5% vs. the yen (FXY), flat against the swissie (FXF), and up 0.3% vs. the loonie (FXC). The reactions in stocks, commodities, and fixed-income are far greater.
The dollar will benefit over time from the energy revolution, Societe Generale says: “Global reserve currency status allied with less dependence on foreign investors will boost the currency on a five-year view.”
According to a BNP Paribas study, the combination of higher exports and reduced petroleum imports could benefit the dollar’s fundamental equilibrium exchange rate by as much as 16% on a 10-year horizon.
"Tapering is in the price already; we find it difficult to see where the dollar strength would come from," says Goldman's Tom Stolper, leaning against the crowd by taking a bearish view on the greenback (UUP +0.1%) for 2014.
He sees the dollar falling to $1.40 against the euro (FXE -0.2%) - no big deal given it's at $1.3724 at the moment - but it's a large deviation from the Bloomberg contributor consensus of a strengthening all the way to $1.28. Of 46 surveyed by Bloomberg, 42 expect the greenback to gain vs. the euro next year.
"We expect all major central banks on hold until at least 2015 - hence no immediate catalyst" for the dollar to strengthen further, says Stolper.
The 10-year Treasury yield jumps to 2.92% following the jobs numbers beat and the far bigger-than-expected dip in the unemployment rate to just 7%. The government shutdown apparently affected this month's speed of decline in the UE rate, but not the level - i.e., it would be at 7% no matter the shutdown, but the furlough and then return of workers caused all of the decline to occur in the November report.
Stock index futures remain about where they were, the S&P 500 (SPY) +0.5%.
Gold (GLD) is off 1.25% to $1,216 per ounce and the dollar jumps, with UUP +0.5% premarket.
November's PMI read of 57.3 is up from 56.4 last month, and the highest print this year. Leading is a 3 point gain in New Orders to 63.6 and a 2 point gain in Production to 62.8. Supplier Deliveries curiously fell 1.5 points to 53.2 (drones?).
Treasury yields move to session highs after FOMC minutes show a committee maybe moving towards the taper even without improvement in the labor market. The 10-year yield is up 6 basis points at 2.77%. TLT -1.3%, TBT +2.6%.
Gold extends it loss, hitting $1,250 per ounce, the lowest price since July. GLD -1.9%.
UUP +0.4% premarket as the dollar gains across the board behind the strong jobs print. The greenback is making its biggest move vs. the yen (FXY -0.7%), but is also higher vs. the euro (FXE -0.4%), pound (FXB), Swiss franc (FXF), and aussie (FXA -0.5%).