The US dollar dropped yesterday after the release of the Federal Reserve policy minutes and continued to move lower today (though not against all major rivals). The report sent a confusing message to the markets, but most market participants considered it to be dovish.
The Fed released the minutes of its July meeting yesterday. On one hand, they said that many policy makers thought the time for an interest rate lift-off is nearing:
Most judged that the conditions for policy firming had not yet been achieved, but they noted that conditions were approaching that point.
On the other, there were those who believed that weak inflation will not allow monetary tightening soon:
However, some participants expressed the view that the incoming information had not yet provided grounds for reasonable confidence that inflation would move back to 2 percent over the medium term and that the inflation outlook thus might not soon meet one of the conditions established by the Committee for initiating a firming of policy.
Talking about inflation, the Consumer Price Index, also released yesterday, disappointed economists, rising just 0.1 percent in July. That is compared to the median analysts’ estimate of 0.2 percent and the June’s increase of 0.3 percent.
All in all, the Wednesday’s news decreased chances of a September rate hike quite noticeably, though there are still people who anticipate the Fed to make a move as soon as the next month.
EUR/USD rose from 1.1119 to 1.1132 as of 1:32 GMT today. GBP/USD ticked up from 1.5678 to 1.5687. At the same time, USD/JPY gained from 123.78 to 123.94 following yesterday’s big drop.
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