The U.S. dollar appears frozen as parts of the Midwest brace for Antarctic-like weather. The greenback may fall today if the Fed sticks to the script of remaining patient and flexible.
The Fed is expected to deliver a dovish message and signal that they will be patient in raising rates. The Fed will begin their new communication strategy of having a press conference after all FOMC decisions this year. The Fed’s balance sheet reduction has been blamed for some of the selloff we saw since mid-December.
The Fed initially planned to shrink the balance sheet by $2 trillion dollars, and investors will look for clues if they signal that it will end much sooner. Most economists expect the balance sheet runoff to continue for the rest of the year. The Chairman may provide a little more clarity on the balance sheet, but don’t expect specific levels.
The U.S.-China 90-day trade truce is coming to an end on March 1 and today’s start of the two-day meeting with high level officials will tackle key core U.S. demands on intellectual property rights and forced technology transfers.
China has already delivered proposals on narrowing the trade gap by purchasing goods, but we may see the discussions fail to reach any significant agreement on the core issues. The talks could very well fall apart this week as both sides attempt to outline key stances for negotiation purposes, but the door would be open for another round of negotiations.