January 11, 2017–Recent volatility in the value of the U.S. dollar index (DXY) and the Chinese currency (CNY) would indicate rising concerns about the likelihood of trade disputes between the incoming Trump administration and China. President-elect Trump has criticized China for “eating our lunch.” He has threatened to impose large tariffs on Chinese imports, suggesting that his goal is to negotiate a good deal with China that would be fair for American companies and workers.
December 16, 2016—Inflation was up 1.7% year-over-year in November, and we suspect it will move above 2% for the next several months. The Consumer Price Index (CPI) posted its fourth consecutive increase in the month of November, 0.2% higher than the October reading and 1.7% higher than a year earlier. This is the strongest annual advance since October 2014. The slight increase in month-over- month terms was exactly as the market expected.
December 15, 2016— The Federal Open Market Committee (FOMC) of the Federal Reserve unanimously voted to raise its target for the federal funds rate on December 14 from a range of 0.25%–0.5% to a range of 0.5%–0.75%. The decision was not a surprise to markets, as the market for fed funds futures had priced in a 100% chance of a hike, up from just a 50% chance in September.