Goldman Sachs: Fed Easing And Yellen Nomination In Focus

Goldman Sachs note that "minutes from the November 4-5 FOMC meeting indicated that the committee discussed its asset purchase programs at length. Following a downgrade of their Q4 and Q1 GDP forecasts, our economists now expect the Fed to increase the weighted average maturity of its Treasury purchases at the December meeting. This should help keep longer-term Treasury yields contained over the near-term, supporting our USD short recommendations. Market focus has also turned to the potential Dollar policy of the incoming Biden Administration, now that former Fed chair Janet Yellen has been tapped as the next Treasury Secretary. In her role at the central bank Yellen spoke about the Dollar in direct, matter-of-fact terms, noting, for example, that appreciation after 2014 weighed on US growth and inflation. As San Francisco Fed President she also discussed the currency in the context of current account sustainability, saying "with the dollar remaining roughly where it is, relative to other currencies, this trend is likely to continue to exacerbate, to go from five percent [of GDP] current account deficits to higher levels". Markets will likely pay close attention to Yellen's early comments on the Dollar as Treasury Secretary nominee; her past remarks suggest she may acknowledge the macroeconomic effects of currency fluctuations, rather than simply recite the "strong Dollar" mantra of past administrations."