We have more than one big story this week. First up is the Fed policy meeting that is virtually certain to deliver a rate cut but with attention focused on what is said about the Fed then waiting to see the effects. As noted above, the CME FedWatch has a probability of a December cut at only 18.7%, from 26.5% a week ago. If the Fed abstains in December, it will be a total of three cuts and historically, that’s a lot.

Then we get the GDP data, likely a number somewhere between 1.3% (Macroeconomic Advisors) and 1.8% (Atlanta Fed). The usually gloomy NY Fed had 1.91%. And of course the ADP estimate of private sector payrolls on Wednesday followed by nonfarm payrolls on Friday.

While all this US data is pouring out, other economies are delivering data, too, with the Bank of Japan on Wednesday. See the Economic calendar. Everyone will be watching the CPI and PMI data out of Europe late in the week.

To introduce a little of the trickiness that can pervade what passes for logic in FX, Authors points out that the Fed cutting rates this week won’t move the dollar much, since everyone else has even worse returns. “But a clear steer from Powell that the Fed doesn’t intend to raise rates in December would lead some to fear a mistake, which could damage the economy and increase risk. The dollar will rise again if Powell attempts to hold the line against further rises.”We think Authors wrote this wrong. He means the dollar will rise if the Fed announces no more cuts.  

But the Fed never says anything that clearly. The Fed has been taking the stance that rate cuts are not actually needed, but serving as insurance against any further drop in sentiment toward risk-taking. The single best barometer of anti-risk sentiment is capital spending plans, and we are still waiting for an update on that. The St. Louis Fed has not yet updated that data series from z2.

In the meantime, the 10-year yield may be a proxy for sentiment toward risk. It was as low as 1.469% in early September and over 1.83% this morning. Doesn’t this imply the bond boys are retreating from recession gloom? If so, the dollar can weaken, not because the Fed is cutting rates but rather because the perception of the risk of recession is lessening. It won’t necessarily be true-we can still get recession-but not yet, and not if the China trade deal goes through.

Yes, we are back to that tiresome thing. Bloomberg reports, “Chinese officials confirmed over the weekend that the US and China are close to finalizing the “phase one” deal Donald Trump and Presidents Xi Jinping are expected to sign on the sidelines of the Nov. 16-17 meeting in Chile of the Asia-Pacific Economic “I don “‘ The site reviews what’s in the deal so far, and it’s not terribly impressive. But never mind-the mere fact of signing a deal is a news event, not the true economic meaning of the deal.

This has tremendous meaning for stock markets – still going up-and for risk-off-way off. This implies the dollar has more room to fall, especially if nothing risky-looking rises up. Even a three-month extension of Brexit is a risk-off. If we expect sterling to keep firming, the euro can keep firming, too.

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A slow start to the week sees the American currency giving up some of its latest gains. EUR/USD trades just below the critical figure. Dull trading ahead of US first-tier events later in the week.

The Pound extends its recovery against its American rival, waiting for more Brexit definitions. EU’s Tusk confirmed Brexit extension until January 31st, UK Parliament to make the next move.

Japanese data failed to impress, as the Corporate Service Price Index came in as expected at 0.5%. The US macroeconomic calendar includes minor figures related to economic activity. USD/JPY extends its consolidative range ahead of US first-tier data later this week.

Recent price movement puts Bitcoin back on a rising price scenario. Ethereum and XRP, with fewer profits, get better setups than Bitcoin for the medium term. Volatility may increase sharply in the short term.

Gold refreshed daily tops during the early European session, albeit lacked any strong bullish conviction and remained well below the three-week tops set on Friday.

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