- FOMC says some members of the Committee see the need for raising rates above neutral.
- Today’s housing data from the U.S. disappoints.
- US Dollar Index looks to close the day at its highest level in a week.
The US Dollar Index, which measures the greenback’s value against a basket of six major rival currencies, recorded modest gains with the initial reaction to the FOMC’s September meeting minutes. The DXY, which rose to a fresh weekly high at 95.56, was last seen at 95.54, where it was up 0.47% on the day.
According to today’s publication, some members of the Committee judged that it might be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level in order to reduce the risk of a sustained overshooting of the 2% inflation objective. Regarding the near-term outlook, “members expected that further gradual increases in the target range for the federal funds rate would be consistent with sustained expansion of economic activity,” the FOMC said. The CME Group FedWatch Tool’s December rate hike probability rose to 81.4% from 78.5% a day ago following the release.
Commenting on the FOMC’s remarks, “Call it what you will, normalization, hawkish, counter-cyclical, the FOMC minutes underlined the Fed’s determination keep its rate policy intact through 2019. The question the governors can’t answer is has the economy become addicted to low rates?” FXStreet Senior Analyst Joseph Trevisani said.
Earlier in the day, the data published by the U.S. Census Bureau showed that housing starts and building permits declined by 5.3% and 0.6%, respectively, on a monthly basis in September.
Especially with today’s inflation data from the euro area and the UK both showing a slowdown in inflation growth, the monetary policy divergence between the Fed and other major central banks such as the ECB and the BoE could continue to boost the demand for the greenback.
Technical levels to consider
The DXY could face the initial resistance at 95.80 (Oct. 10 high) ahead of 96.20 (Oct. 9 high) and 96.70 (Aug. 17 high). On the downside, supports are located at 95 (psychological level), 94.45 (Sep. 13 low) and 93.80 (Sep. 21 low).
Share
