|1. FOMC Meeting and Inflation|
The Fed’s two-day meeting concludes with a policy decision on Wednesday at 1:00 pm CT and they are widely expected to hike interest rates a quarter of a point. Fed Chair Janet Yellen will hold a press conference at 1:30 pm CT. This is not only the last meeting of the year, but also the last for Yellen. With a quarter point rate hike essentially priced in, this meeting is less about the headline hike and more about the guidance and expectations the Fed deliver. Most recently, we have seen Fed officials waiver from the confident assessment of three rate hikes in 2018 due to lagging inflation. Janet Yellen has expressed a fear that they could have stopped inflation in its tracks by hiking rates too aggressively. Ironically, the Fed will have a fresh read on inflation ahead of Wednesday’s decision with PPI due out on Tuesday and CPI on Wednesday morning. We have been pounding the table on our belief that a buy opportunity in Treasuries and Gold will begin to set up once we get through this meeting and tax-reform and just ahead of the New Year. This week’s inflation data, the Fed meeting and the dot play will all be key in setting this trade up.
2. Bitcoin Launch
Bitcoin futures begin trading on the CBOE (Chicago Board Options Exchange) tonight, Sunday December 10th. The contract size is 1 Bitcoin and the margin will be 44%. This means that with the price of Bitcoin at $15,500 you need $6,820 in your account per 1 Bitcoin future. The minimum price fluctuation will be $10.00. Blue Line Futures has Bitcoin futures ready to go upon the launch tonight and upon the CME (Chicago Mercantile Exchange) launch next Sunday. Visit our ‘Open an Account’ page to open your account today at OPEN AN ACCOUNT TODAY.
3. Central Banks in Europe
The Federal Reserve is only one of five central banks meeting this week. The European Central Bank, the Bank of England and the Swiss National Bank all meet Thursday morning. Also, the Central Bank of the Russian Federation meets on Friday. Though none of the major banks are expected to change policy in any surprising fashion, we will be watching the ECB most closely in tandem with the Federal Reserve meeting Wednesday. In our research, we have been making the long-term bull case for the Euro. Ultimately, we believe the Federal Reserve will begin tightening policy at a slower pace than the market currently believes, and the ECB will begin tightening policy at a faster pace than the market currently believes. A handful of ECB policy makers are paving the way for a hike in the fourth quarter of 2018, something that the market is not pricing in. We are looking for a hawkish tone from the ECB and a solid buy opportunity against major three-star support at 1.1728-1.1730.
4. China data – Energies – Base Metals – Aussie
Data from the world’s fastest growing major economy continues to trickle out. Trade Balance data last week crushed expectations but did little to help the bleed in the base metal camp. However, CPI and PPI missed the mark late Friday night and this week we turn our eye to Industrial Production and one of our favorite reads in Fixed Asset Investment on Wednesday evening. Australia’s job report is also due out Wednesday evening. Though the energy sector recovered well on Friday, the base metals sector continued to pare yearly gains. However, the Aussie Dollar, one of the best ways to play China, traded to the lowest level since June. We remain bearish on the energy sector and expect the down side to resume this week. As for the base metals, we remain upbeat and though they might take a breather for the next two to three weeks, we expect a strong January. The bears now have the upper hand in the Aussie trade and the door is open to major four-star support at .7390.