December’s FOMC minutes have been released to the public, with few surprises to send the markets into chaos. Response to the minutes has been muted across the majors, with no immediate changes in direction for the USD being apparent.

The FOMC minutes are a great tool for looking into the decision making process of the U.S. Federal Reserve (FED). Here are the key takeaways from the December FOMC meeting:

• Passage of tax reform prompted the FED to “boost projections of real GDP growth over the next couple of years.”
• FED GDP projections for 2018 were revised upward to 2.5% from 2.1%.
• Industrial production increased “briskly” and holiday spending was “strong.”
• Several members of the FOMC are “quite uncertain” about the impact of tax reform on the labor supply.
• Members Neel Kashkari and Charles Evans voted against December’s rate hike, citing concerns over lagging inflation.

All in all, today’s FOMC release told us much of what we already knew. Tax cuts have stimulated equity valuations and consumer spending. The big question addresses exactly how companies will allocate the coming 2018 tax windfall. Will the money saved from the new 21% corporate tax rate be spent on an expansion of operations or on dividends and stock buybacks?

Corporate valuations depend upon stock price, which is derived largely from the prospect of future growth. In my opinion, we are highly likely to see a majority of large companies expand, driving unemployment well below 4% in the near-term. This will act as a catalyst for the aggressive monetary policy expected for 2018.

U.S. Overnight/Presession Economic Calendar

In addition to the FOMC, there are a few events to be aware of in the coming 18 hours:

Country                            Event

U.S.                                   Vehicle Sales, API Crude Oil Stock, Jobless Claims

China                                Caixin Services PMI

Eurozone                          Markit Services PMI, Markit PMI Composite

U.K.                                   Mortgage Approvals, Money Supply

It is a relatively full economic calendar coming up for the U.S. overnight and pre-market sessions. For up to the minute analysis and trade ideas, tune into my colleagues Rowan, Arslan, and Skerdian for coverage of the Australian, Asian, and European sessions.