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The FOMC minutes to be released at 19.00 GMT are the highlight of today’s session. Remember that the October meeting took place before the impressive nonfarm payroll release earlier this month, so the focus will be more on the Fed’s discussion around the global economy and the risks that they have previously been looking closely at, namely China. Investors will also be very keen to hear if there is any more detail as to the likely path and timing of rate hikes beyond the first one should it come next month (not for us), as this will determine the strength of any subsequent leg higher in the dollar.
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The US Dollar declined after the Federal Reserve released minutes from the October 27th to 28th meeting. Diving into the transcript, FOMC members wanted to convey that a December rate hike may be appropriate barring unanticipated shocks. Officials are encouraged by a solid pace of spending and investment. A couple of members were concerned that the wording change might have been too strong in signaling liftoff in December. While most members agreed that December could be an appropriate time to hike rates, Fed officials said an actual decision would be dependent on data. Some policy makers even said that it is unlikely that liftoff conditions would be met. Others saw reasoning to avoid delaying tightening. Most agreed that risks from abroad are now diminished. Several Fed members said downside threats to the outlook remain. The Minutes document seemed to fail at bolstering the case for an imminent rate hike. Two-year government bond yields fell in the aftermath of the transcript release. At the same time, S&P 500 futures – a proxy for risk sentiment – rallied. Traders may have cheered the prospect of rates staying near zero for longer as supportive for economic growth at a time when overall global performance appears to be slowing. This can bode well for risk-sensitive assets.
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MONEY MANAGEMENT: Protect all your trades during US data
Thank you greatful analisys. The rebound @ 1.0750 is temporary, the trend will go to the parity in the next 6 months. If the FED acts on the rate, and the ECB will ease the EURUSD could go to 0.95