It has been a somewhat muted open for the New York cash open, with the U.S. indices trading moderately in the red. Today’s economic calendar is vacant with very few market moving events slated for release. However, members of the U.S. Federal Reserve (FED) will become involved in the trading day momentarily as speeches from several Reserve Bank heads are scheduled in the coming hours.

As we roll toward the first FED meeting of 2018, investors are taking a “wait and see” approach regarding the future of monetary policy facing the USD. The CME Fedwatch tool has assigned overwhelming odds in favor of rates remaining static at the January 31 meeting. While no change is expected, a coming shift in leadership at the FED will shake up the currency markets.

Transition At The FED

No doubt about it, 2018 is going to be a pivotal year for U.S. monetary policy. Acting FED Chair Janet Yellen is serving out the last days of her term, soon to replaced by Jerome Powell. Powell has alluded to a preferred “gradual tightening” of interest rates over an extended period. Previous FOMC minutes releases have supported this notion, calling for three rate hikes for 2018.

With a period of upcoming uncertainty facing FED leadership, it is expected that the USD is likely to experience considerable volatility. Today’s forex market reflects the coming rate hikes, with the USD showing strength against the Euro, Canadian dollar and Swiss franc.

Overview

A new year brings fresh opportunities. A changing of the garb for the leadership of the FED will provide the volatility that short-term traders thrive on. Even though Powell’s replacement of Yellen is no surprise, expect action to pick up across the majors as the transition takes place.

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