Fed minutes could hint at exit, Greece slippery

NEW YORK (BestGrowthStock) – Hints of a Fed exit strategy could roil the Treasury market on Wednesday after U.S. policy makers release minutes from their most recent meeting.

Ongoing questions over the fiscal health of Greece and the rest of the euro zone will also affect U.S. Treasury investors, as skittish global markets have kept money flowing to safer assets.

Minutes from the Federal Open Market Committee’s January 26 and 27 meeting are slated for release at 2 p.m. EST (1900 GMT). Policymakers maintained their pledge to hold interest rates near zero at the time.

But a dissenting note from Kansas City Federal Reserve Bank President Thomas Hoenig has sparked discussion that monetary tightening could be approaching. Data suggesting more strength in the U.S. economy would validate concerns some have about too-loose monetary policy.

“We might see how they’re dealing with the various tools that they’re going to use for the exit strategy,” said John Spinello, Treasury bond strategist at Jefferies & Co in New York.

Reports on U.S. housing starts and capacity utilization could give investors a better sense of the strength of the economy, he said.

Analysts surveyed by Reuters expect housing starts to have edged higher in January after an unexpected fall the previous month. Capacity utilization is expected to have inched up in January, adding to its rise in December.

WORRIES ABROAD

But investors will also keep an eye open for news from abroad, especially Europe, where worries over heavily indebted Greece have shaken investor faith in the euro zone.

“Any headlines that come out of there could impact our flows,” said Marty Mitchell, chief market technician for Stifel Nicolaus in Baltimore.

European leaders have been quick to voice support for Greece, but slower to provide details on how they could help restore Athens to fiscal health.

Other countries have shown signs of similar fragility, particularly Portugal, Italy, Ireland and Spain.

“This could continue to be a good impetus for flows in our sector long after Greece is resolved, because there are other countries that have fiscal strains as well,” Mitchell said.

Foreign exchange and equities movements worldwide will help define markets overnight, Spinello said.

The euro posted its biggest one-day gain since July against the U.S. dollar on Tuesday, as investors saw the single currency’s beating in recent weeks as overdone.

Stock Today

(Reporting by Luciana Lopez; Editing by Dan Grebler)

Fed minutes could hint at exit, Greece slippery