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Markets Await FOMC Minutes for Fed Policy Clues
Developing
In Short: The focus now shifts to tomorrow's FOMC meeting minutes, which could provide fresh clues about the Fed's next steps, especially regarding inflation and future rate policy.
The focus now shifts to tomorrow's FOMC meeting minutes, which could provide fresh clues about the Fed's next steps, especially regarding inflation and future rate policy.
If the Dollar continues to rise while equities and AUDUSD hold their ground, markets could enter an unusual environment where both USD and risk assets remain supported.
Gold is trading up, which is correlated with the US dollar trading down, creating a seesaw effect.
The upcoming FOMC Minutes will be crucial for driving the USD and non-yielding Gold, as they will provide insights into further rate hikes and policy metrics.
Asia markets are cautious near record highs, with the RBI raising the key repurchase rate by 25 basis points to 5.50%, as expected.
The FOMC met expectations and raised the fed funds rate by 25 basis points to the 3.75%-4.00% range in September, with a unanimous decision.
Data released last week has tempered hopes for further tightening, and investors will analyze the Minutes to confirm a rate hike in December.
The Minutes will also address the strength of the US labor market, which was highlighted in the September policy meeting.
US Personal Consumption Expenditures (PCE) Prices Index showed that inflation remained steady in August, providing some leeway for the Fed to assess the impact of September’s rate hike.
US stock futures remain subdued as a rebound in US Treasury yields weighed on investor sentiment ahead of the FOMC Minutes release.
The Minutes will be released on Wednesday, alongside the US Treasury's 10-year note auction.
Analysts suggest that the Minutes will offer limited fresh insights into US monetary policy, given the release of subsequent employment and personal consumption expenditure (PCE) data.
What this adds
The upcoming FOMC minutes are expected to offer limited fresh insights into US monetary policy, given the release of subsequent employment and personal consumption expenditure (PCE) data.
The Minutes will be crucial for confirming the Fed's narrative on inflation and labor market strength, and for guiding expectations on further rate hikes.
Background
TD Securities analysts suggest that the upcoming September Federal Open Market Committee (FOMC) minutes will offer limited fresh insights into US monetary policy, given the release of subsequent employment and personal consumption expenditure (PCE) data.
What's still developing
- Think of it as a seesaw, when one goes Up the other goes Down.
- Born and bred in Argentina, Pablo has been carrying on with his passion for FX markets and trading since his first college years.
- The usual MBA Mortgage Applications are due, seconded by the NY Fed’s Consumer Inflation Expectations and the FOMC Minutes.
- Spot prices trade around the 0.6970-0.6965 region during the early European session amid a broadly firmer US Dollar (USD) as the focus remains glued to the FOMC Minutes.
- Meanwhile, traders have sharply pared back bets on further policy tightening by the Reserve Bank of Australia (RBA) in the wake of softer inflation data and Governor Michele Bullock's less hawkish comments following the September rate hike.
- The monetary policy statement endorsed that view and reaffirmed the committee’s commitment to deliver price stability and pursue a monetary policy to “support a timelier return to the Committee’s 2% target.” The statement also highlighted the strength of the US labour market, which boosted expectations of back-to-back rate hikes.
- Warsh stated that inflation has been “too high for too long” in the press conference following the decision.
- Data by GDPNow estimates that the US economy accelerated to 3.7% annual growth in the third quarter from the 2.2% increase seen in the previous quarter, providing an ideal scenario for a tightening cycle.
- Data from the CME’s FedWatch Tool shows a 78% chance that the bank will leave rates unchanged later this month, up from 50% last week.