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The US FOMC minutes, of the June 12/13 meeting, will be released on Thursday at 18:00 GMT. At that meeting, the FOMC, voted to raise the Federal Funds rate to the 1.75% – 2.0% range. Usually, the minutes are released on Wednesday but the day was changed due to Independence Day.  

Key notes

The move on rates at the June meeting was as expected. The headline came from the upgraded projections, that included the “dot-plot” showing 4 rate hikes for 2018. Fed’s Chair Jerome Powell presented an upbeat economic outlook.  

“We expect the minutes to provide additional insight into the Committee’s deliberations on longer-term monetary policy questions as well as the potential downside economic risks arising from US trade protectionism.”, wrote Nomura’s analysts.  

According to analysts at Deutsche Bank, the minutes could also show “some discussion on the Fed’s balance sheet policy given that interest on excess reserves (IOER) was raised five bps less than the target range for the policy rate.” They don’t see changes to the pace of balance sheet roll off for the moment.  

Implications for DXY

The US Dollar Index peaked in June after the meeting at the 95.50 area. It reached that level again last week but failed to break higher and since then it has been correcting lower. Today it found support around the 94.20 key level.  

The minutes could have an impact on the greenback and in bond yields. If the minutes show a hawkish tone or a very positive outlook, reaffirming what Powell said during the press conference, US yields could move higher and also the greenback.  

If the DXY gains momentum it could climb to test 94.75 in the short-term and above here attention would turn to 95.00 and 95.50 (Jun highs). A consolidation on top of 95.50 is needed in order to clear the way to more gains.  

On the flip side, a cautious tone from the minutes, like avoiding mistakes of too much tightening too soon or if the document contains mention to potential bubbles in assets prices the US dollar could weaken, particularity if US yields drop. In that case, the DXY might fall againg to test the 94.20/94.00 range support. A break lower would signal an extension of the bearish correction with potential targets at 93.85, 93.50 and 93.20.

About the FOMC minutes

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.