EURUSD
,
DXY
KEY POINTS POST FOMC MINUTES: - FOMC Minutes Turns into Non-Event Following Recent Inflation Print and No Surprises.
- DXY Eyes Recovery Following Bounce off Key Support Area. More Upside Ahead?
- EURUSD Flirts with 1.0900 as Long-Awaited Retracement May be Upon Us.
The US Federal Reserve released the minutes of the November FOMC meeting a short while ago with no real surprises and a rather subdued market reaction. This shouldn’t come as a surprise given the data and the reaction market participants since then with the recent US Inflation print in particular facilitating a broad sell off in the US Dollar.
The Fed's outlook may have shifted, but some key takeaways from the meeting include unchanged September staff projections and a continued emphasis on data-based decision making. Policymakers noted that further policy tightening would be appropriate if progress towards the inflation goal was insufficient.
Despite positive recent CPI data, Fed policymakers remain concerned about core services inflation and the need for sustained lower inflation. According to the FedWatch tool, rate expectations are largely unchanged, with a first rate cut expected in May 2024 and fully priced in for June 2024.
US ECONOMY
The US Economy is showing positive signs for the Fed with cooling inflation and labor market. This is expected due to the current interest rate environment and the resumption of student loan repayments. Consumer spending and demand may be affected, leading to lower retail sales and prices if this trend continues.
The holiday season and Black Friday could disrupt consumer spending. Despite the current situation, credit card application rates remain strong in 2023, according to the New York Fed. This makes December data unreliable for assessing the overall economic environment. It seems unlikely that the Fed will raise rates at their December meeting or in early 2024.
EURUSD
,
DXY
MARKET REACTION Following the data release the dollar index remained relatively unchanged which shouldn’t come as a surprise. The
DXY
does face some resistance at the time of writing as it has tapped the 200-day MA which could provide some resistance tomorrow as well.
EURUSD
has already begun its selloff thanks to the DXY recovery today. This has seen EURUSD push below the 1.0900 level with market participants keeping a close eye on whether the move will be sustainable. Immediate resistance around the 1.0950 area and todays daily high with a break higher leading EURUSD toward the psychological 1.1000 handle.
