Details of FOMC Minutes Will Drive US Dollar Today

Talking Points

– DXY Index changed by 103.64 quickly yesterday, though no daily tighten was achieved.

– EUR/USD set a uninformed cycle low yesterday before rallying behind today.

– See a DailyFX Economic Calendar and see what live coverage for pivotal eventuality risk impacting FX markets is scheduled for a entrance days on a DailyFX Webinar Calendar.

Amid a still calendar on a second full trade day of a year, a Dec 2016 FOMC assembly mins mount out as a poignant matter for a US Dollar today. The minutes, reflecting a review had amid a Fed’s 25-bps rate hike, will certainly expostulate sensitivity on what has been a muted day for a greenback so far.

The Dec 2016 FOMC mins should exhibit a carefully hawkish tinge among policymakers, nonetheless maybe not to a grade to that rates markets have aggressively priced-in movement over a subsequent year. While financial markets have been discerning to send acceleration expectations aloft after a Trump choosing win, usually a “few” FOMC officials, per Fed Chair Janet Yellen, have incorporated a intensity impact of mercantile impulse into their rate projections (affectionately famous as a ‘dot plot’).

If this is a case, then, there might not be a hawkish paint to a FOMC mins now that seemed outwardly final month. We’re going to wish to compensate sold courtesy to see to what grade FOMC officials have incorporated changes in mercantile process into their forecast, and what skeleton they might have to conflict to pronounced changes. In sum, while markets have been reading in between a lines to find justification of 3 rate hikes in 2017, it is probable that a Dec 2016 FOMC mins exhibit a some-more discreet tinge than is now being labelled by markets.

Any greeting from a FOMC mins should be looked during exclusively by a lens of seductiveness rate differentials: if Treasury yields boost post-minutes, a US Dollar should do good around USD/JPY; if Treasury yields decrease, a US Dollar should do feeble around EUR/USD.

Read more: US Dollar Starts Off a New Year with a Bang

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— Written by Christopher Vecchio, Senior Currency Strategist

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