Although the minutes of the Fed’s July meeting were not dovish, they were less hawkish due to the lack of clues in favor of continuing to raise rates by 75 basis points. After the announcement of the minutes, the US dollar fell, and the price of gold and US stocks rebounded. The US dollar index, which failed to be boosted by the minutes, may enter a stage of shock consolidation.
Summary of the minutes of the Fed’s July meeting:
Fed attendees see continued rate hikes as appropriate. Many participants argued that tightening monetary policy by the Federal Reserve may become even more necessary. Participants agreed that the pace of policy rate increases and the extent of future policy tightening will depend on the impact of information received on the economic outlook and risks to the outlook. Participants argued that as monetary policy stance tightens further, it may be appropriate to moderate the pace of policy rate increases at some point while assessing the impact of cumulative policy adjustments on economic activity and inflation. Some participants said monetary policy must be “tough enough” to keep inflation in check for some time. Participants saw a potential risk that the public would question the Fed’s resolve to fight inflation. Participants stressed that slowing demand will play an important role in lowering inflation. Participants noted that recent data on inflation expectations was “in line” with the longer-term forecast of 2%. Participants agreed that there was “little evidence” that inflationary pressures were fading and that it would take quite some time to resolve the issue. Participants argued that inflation will have a delayed response to monetary policy tightening and an associated slowdown in economic activity, and is likely to remain uncomfortably high for some time.
The Federal Reserve is raising interest rates frantically, will the dollar refresh a 20-year high in the third quarter? 👇👇👇
Market reaction after the release of the minutes of the Fed’s June meeting
After the release of the minutes of the Fed meeting, the market’s expectations for a rate hike in September did not change much. The U.S. federal funds rate futures indicated that the probability of the Fed raising interest rates by 50 basis points in September was 57.5%, which was basically the same as before. However, it may be because there is no clue about continuing to raise interest rates by 75 basis points, the US dollar index weakened slightly after the announcement of the minutes, and the exchange rate of non-US currencies against the US dollar rebounded.
After the minutes of the Fed meeting were released, gold prices rebounded from a weaker dollar and strengthened from near the intraday low, stock market risk appetite rebounded, and the U.S. stock index rebounded to recover early losses, and the 10-year U.S. bond yield retreated from the intraday high.
US dollar index trend technical analysis
The minutes of the Fed meeting did not give the dollar the impetus to break through the 107-line resistance. Technically, the daily Bollinger Band tends to be flat, indicating that the US dollar index may enter a sideways consolidation. On the upside, continue to pay attention to resistances such as 107 and 107.50. If it can break through 107.50 in the follow-up, it will gain the potential to rise to the high point in July. On the downside, 106.20, the middle rail of the Bollinger Band, acts as the initial support, and after falling below the support, focus on 105.80 and 105.20 and other levels. (Follow the author on Twitter @Legen_DailyFX )
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