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- FOMC minutes are approaching and the DXY, slightly below its peak of the year, resembles the Dovish market bias.
- FOMC Minutes showing the US Federal Reserve focuses on the risks of prolonged trade wars.
Today, we have a long-awaited report from the Federal Open Market Committee on the July Board meeting, during which the Federal Reserve reduced interest rates by 25 basis points, which Fed Governor Powell called a reduction in the insurance rate against external headwinds. to guard against importing a recession.
Indeed, we have seen many actions since the last meeting, which could give the minutes a slight fictitious twist to what the markets have evaluated – going back and forth between the Fed's expectations. at their next meeting (based on data such as retail sales and the booming consumer price index), or an additional 25 basis point reduction due to high external economic and geopolitical risks.
Unfortunately, the minutes will probably be considered historical and useless because of the latest developments in trade wars and the announcement by the Trump administration of the latest tranche of tariffs that will put Powell under the spotlights this Friday at Jackson Hole. However, the minutes should reflect the member's view that the combination of the risk of political events and market panic adds to the risks of recession, with the Federal Reserve focusing on external risks, including China and protracted trade wars.
How could minutes affect the dollar?
As for the dollar, the markets are avant-garde and knowing that stakeholders such as the Federal Reserve, Bullard, Evans, Daly, Rosenberg and George, have all turned to a neutral position and relatively optimistic about the dollar. With regard to the economy, this week's events could be a disappointment for the markets – indeed, the stocks have held up well and, besides the fact that Trump is reducing the dollar down, without success, there is very little to expect from these events that could have a material impact on the markets have already incorporated prices – However, the DXY, slightly below its peak of the year, has decreased slightly compared to the levels recorded at the beginning of the week , thus resembling the dovish market stance and the minutes likely reflect the lack of continuity among board members should ultimately keep the course on the dollar which, selo n the trade-weighted US dollar index, is already trading at the highest level since 1973.
Key notes:
About the minutes of the FOMC
FOMC stands for Federal Open Market Committee, which organizes eight meetings a year, examines economic and financial conditions, determines the appropriate monetary policy stance, and assesses the risks to its long-term price stability objectives. and sustainable economic growth. The FOMC minutes are published by the Board of Governors of the Federal Reserve and provide a clear guide to the future US interest rate policy.
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