The big Fed meeting has come and gone and it appears that the doves came out on top this time but the hawks could still get the last laugh. The FOMC maintained interest rates at current levels as expected holding off on interest rate liftoff for now. On this news, USD sold off dramatically sending gold and EUR among other currencies sharply higher on the news, suggesting the street saw today’s news as a win for the doves. Doves appear to be taking heart the “dot plot” (fed funds projections) which showed one FOMC member calling for negative interest rates this year and next, and from the total number of FOMC members calling for liftoff this year falling from 15 to 13. These developments appear to have given the doves the upper hand for now. On the dot plot, one outlier member does not make a trend and the far majority are still looking for one hike this year. On top of this, the Fed raised its 2015 forecasts for GDP and inflation and lowered its unemployment rate forecast. I’ve long argued that interest rate liftoff would be preceded and signalled by an upgrade to member forecasts. Finally, one hawkish dissenter is as expected and could be joined by more hawks at upcoming meetings. Reference to monitoring overseas developments in the statement also confirms my expectation that the Fed would hold off this month in order to give more time for world markets to stabilize, and set the stage for an October or possibly December liftoff. Fed Chair Yellen’s press conference also indicated that the Fed remains on track to raise rates this year. Some of the highlights include: The Fed continues to monitor overseas developments, particularly related to China, concernd about further slowing (ie they held off to make sure China stabilizes as I suspected they might) Labour market is tightening Inflation downdraft from oil crash transitory Every meeting is live for a rate hike. If a press conference isn’t pre-scheduled, one could be added on short notice. Indicated the Fed is not considering negative interest rates (which makes the dot plot look even more like an outlier) Downplayed influence of a possible government shutdown on decision making in answer to a question (ie no prepared comments). Even if it did, the Fed would never say so because they need to be seen as independent of politics Stock markets swung in both directions down then up then down again indicating indecision in the market place although the big declines into the close suggest the doves’ day may already be over. Even in currency trading there has been a battle, although gold and EUR have held on to their early gains, AUD, NZD and CAD have already given back all of their early gains and GBP has been falling back too. This suggests that while the hawks may have lost the battle for now the street is increasingly thinking we are still likely to get an increase this year, potentially as soon as the next meeting in late October. Corporate News Adobe Systems $0.54 vs street $0.50, guides next Q sales to $1.275 to $1.325B below street $1.360B Economic News Significant announcements released overnight include: US interest rate 0.25% no change as expected US FOMC member forecast changes 2015 GDP raised to 2.1% from 1.9% 2016 GDP cut to 2.3% from 2.5% 2015 unemployment rate lowered to 5.0% from 5.3% 2016 unemployment rate lowered to 4.8% from 5.1% 2015 core PCE inflation raised to 1.4% from 1.3% 2016 core PCE inflation lowered to 1.7% from 1.8% Dot plots of FOMC Fed Funds projections 12 members between 0.25% and 0.75% (1-2 increases) 3 members between 0% and 0.25% (no change to rates this year) 1 member projecting negative rates (most likely Kocherlakota a non-voter this year) 1 member projecting 0.75%-1.0% (2 increases one of at least 0.50%) 13 members looking for liftoff this year, 2 in 2016 and 1 in 2017 vs June when 15 were thinking 2015 and 2 2016, a bit dovish at the margins. US housing starts 1,126K vs street 1,160K US building permits 1,170K vs street 1,159K US jobless claims 264K vs street 275K US Philadelphia Fed (6.0) vs street 5.9 US natural gas 73 BCF vs street 72 BCF Swiss SNB lower band (1.25%) no change as expected Swiss SNB upper band (0.25%) no change as expected Swiss SNB deposit rate (0.75%) no change as expected Swiss GDP forecasts 2015 raised to 0.9% from 0.8%, 2016 unchanged at 1.5% UK retail sales 3.7% vs street 3.8% UK retail ex auto & fuel 3.5% vs street 3.8% Upcoming significant announcements include: 11:00 am AEST NZ ANZ consumer confidence previous 109.8 8:30 am EDT Canada consumer prices street 1.3% 8:30 am EDT Canada core CPI street 2.1% vs previous 2.4% 9:00 am EDT China senior officials speech “Renminbi internationalization in volatile markets” in Washington, DC 10:00 am EDT US leading index street 0.2% 1:00 pm EDT US Baker Hughes drill rig count previous 848 Saturday FOMC members Bullard and Williams speaking CMC Markets is an execution only service provider. 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