Credit: The FOMC Minutes are due today at 2 pm ET (1900 GMT)
The economic calendar is light today so it's all about flows to start the year and the FOMC Minutes later in the day.
In general, the Minutes are a release that always gets more attention than deserved. It's rare the report moves the market and the initial move is often reversed.
But that might not be the case this time because the FOMC hiked rates at the December meeting and left the timing on subsequent rate moves ambiguous. The big market driver was the change in the dot plot.
Here is September compared to December:
"The shifts that you see here are really very tiny," she said about the dot plot.
The market isn't quite sure what to expect next. Fed fund futures are pricing in a 12.4% chance of a hike at the next meeting on Feb 1 but that could fall close to zero if the Minutes are complacent.
What's priced in for the FOMC
Current rate hike pricing rises to 34.8% in March and 46.4% in May then up to 72.8% for the June 14 meeting. By year-end the Fed funds futures market is priced for a 94.5% chance of at least one hike and a 12% probability of four hikes.
The Minutes rarely offer clarity on Fed timelines but they set out priorities. If there is increasing confidence in inflation, particularly wage inflation, then it will be seen as a signal about hikes to come.
However, even if the muddled view of the future remains in the FOMC Minutes, it won't necessarily hurt the market's belief in hikes. That's because incoming economic data has been strong and the positive moves in markets wouldn't have been digested in time for the Dec 14 meeting, when the Minutes were taken.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
