The Dollar’s Slump Raises the Stakes Ahead of the Fed Meeting
President Trump thinks the dollar’s decline is “great” — what will he say about the Fed’s hold today?
Key Takeaways
Dollar Sell-Off Continues: With the dollar sell-off initially gaining steam this week as the yen rose amid FX intervention rumors, President Trump’s comments on the matter were interpreted as outright enthusiasm for a lower dollar, pouring fuel on the fire.
Central Bank Meetings in Focus: The Fed’s hold (priced in at 97% odds; same as BoC hold odds for today) may well provoke a further reaction from President Trump, whose preference for lower interest rates will almost certainly not be met today. Powell’s view on the labor market in the press conference is what we will be watching closely.
A Government Shutdown Is Likely This Week: On Friday, January 30th, the previous deal that ended the government shutdown late last year expires — and the base case now is that there will be either a full government shutdown or a partial shutdown (where some agencies are shut down, while others remain open). While a shutdown is a significant political event, we’ve explained before that the economic effects are few, mostly shifting the timing of consumption around the calendar.
