FOMC Minutes Lead to Massive Gains for Dollar

The US dollar jumped today, rising to the highest level since April against the Great Britain pound and the Japanese yen, while also touching the strongest price in almost a year versus the euro. The reason for the stellar performance was the minutes of the latest Federal Reserve policy meeting.

The minutes of the meeting, which has happened at the end of July, turned out to be very bullish. The lines that caught traders’ attention were:

With respect to monetary policy over the medium run, participants generally agreed that labor market conditions and inflation had moved closer to the Committee’s longer-run objectives in recent months, and most anticipated that progress toward those goals would continue. Moreover, many participants noted that if convergence toward the Committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated.

It looks like the imminent monetary tightening is closer than was considered previously. Such outlook allowed the dollar to gain against other currencies, including the sterling that was rising before the news.

EUR/USD sank from 1.3319 to 1.3259 as of 23:19 GMT today, reaching the lowest rate since September. GBP/USD declined from 1.6616 to 1.6597, retreating from the high of 1.6679. USD/JPY climbed from 102.90 to 103.69.

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