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FOMC Meeting Minutes provide a USD sell-opportunity

Some members of the Federal Reserve wanted to raise rates in July or in September. Among the voting members, only Esther George voted for a hike. However, in the wider  membership, there were more proponents for a rate hike.

The US dollar is slightly higher in the initial response, but the gains do not hold. After the initial rise, the dollar retreats.

The reasons for hiking were a concern from the implications of low rates and a danger of inflation. The majority mentioned Brexit, problems in Italian banks and a need to see more data before acting. So, while some members want a rate hike and want it now, they make a small even if vocal minority. A “couple” of participants wanted a rate hike. So,  George was accompanied by only one other, non-voting member. In the past, Fed Chair Janet Yellen clarified that the word “couple” means two, not “several”.

Currency reaction to FOMC Minutes

  • EUR/USD dropped to 1.1240 only to bounce back and leap to 1.1315. EUR/USD  continues its gradual advance.
  • GBP/USD flirted with 1.30 and now trades at 1.3050. The pound faces a test with retail sales tomorrow, after upbeat data today.
  • USD/JPY is now falling to the 100 line.  The first attempt failed. Will the second one succeed?
  • USD/CAD is around 1.2840, as oil prices stabilize.
  • AUD/USD trades around 0.7666.
  • NZD/USD is at 0.7270.

The Fed releases the minutes from the FOMC decision taken in July. In that meeting, the Fed left policy unchanged. While they acknowledged the improvement in the economy,  there was no rush to raise rates.  Since then, we had the excellent Non-Farm Payrolls report but the weak retail sales one.

The US dollar was trading steadily ahead of the publication, which could be hawkish.

Some Fed official have left the door open to a rate hike in September. However, Janet Yellen and her colleagues are unlikely to rock the boat before the elections.

EURUSD FOMC meeting minutes August 17 2016

Update: The USD looks weaker also 30 minutes after the release, but it is not tumbling down.

Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.