Minutes Highlight Market Split

The split in the FOMC Minutes on Wednesday highlighted the battle that's going on among economic forecasters and in markets. The Canadian dollar was the best performer on the day while the US dollar lagged. Chinese and Japanese PMIs are due later.

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The market didn't gain much insight on the path of interest rates from the FOMC Minutes. They largely stuck to the script that Yellen presented in her press conference. The mantra is cautious optimism with high uncertainty.

The minutes laid out how about half the FOMC rejigged its projections and forecasts based on the US election and expectations about coming changes to legislation, taxes and spending. The other half wants to wait and see. Forecasting based on political election promises is a dangerous game but it's a part of trading and the Fed is happy to find a source of optimism after a decade of the New Normal.

The 50/50 split probably also highlights market positioning on the election. Fast money has frontrun what it expects while plenty want to wait and see. It might not be a long wait as VP Pence said the new government will have tax reform legislation in early Q2 and the architecture of something to replace Obamacare around the same time.

In the meantime, there are more concrete signs that the optimism about the new administration has filtered into the real economy. December US vehicle sales were much stronger than expected at 18.26m SAAR compared to the 17.70m consensus. On Thursday, data on ADP and the ISM non-manufacturing index will offer a higher-tier look.

We also note signs of optimism spreading beyond the US. Several well-known prognosticators are picking 2017 as the year Japan finally achieves decent growth. We will get an early look with the 0030 GMT release of the Nikkei services PMI. The prior reading was 51.8.

At 0145 GMT, the Caixin China services PMI is due. The Prior was 53.1. Don't expect a significant market reaction from either but keep a close eye on CNY as it rose the most since July on Wednesday.

A quick note on January seasonals as well. It's one of the strongest months for the US dollar and gold. It's also among the worst months for the euro and one of the worst for the S&P 500 (despite the strong start so far).