- FOMC repeats further gradual rate hikes are consistent with current economic conditions.
- December rate hike odds rise slightly.
- US Dollar Index remains on track to close the fifth straight day lower.
With the initial reaction to the FOMC’s meeting minutes, the US Dollar Index, which tracks the greenback against a basket of six major currencies, quickly fell to a new session low at 94.95 but recovered quickly as the publication didn’t offer any information that would change markets’ expectation of two more rate hikes before the end of the year. At the moment, the index is down 0.06% on the day at 95.16.
The FOMC repeated that the labor market continued to strengthen and the economic activity expanded at a strong pace. Regarding the monetary policy outlook, “further gradual increases in the target range for the federal funds rate will be consistent with the sustained expansion of economic activity, strong labor market conditions, and inflation objective,” the FOMC said. Following the publication, the CME Group FedWatch Tools’s rate hike odds remained steady near 94% in September while the probability of one more 25 bps hike in December rose slightly above 63% from 60% a day ago.
Earlier today, the data from the U.S. showed that existing home sales fell by 0.7% in July to miss the market expectation of 0.6%.
Meanwhile, regarding the political drama surrounding President Donald Trump and his former lawyer pleading guilty to violating campaign finance laws, White House press secretary Sarah Sanders said the president “did nothing wrong,” and added that there were no charges against the president.
Technical levels to consider
A daily close below 95 (psychological level/20-DMA) could cause the index to extend its losses toward 94.10 (Jul. 26 low) and 93.20 (Jun. 14 low). On the upside, resistances align at 95.45 (50-DMA), 96.40 (Aug. 20 high) and 97 (Aug. 15 high).
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