Trading Signals

Takeaways from Yesterday’s FOMC Minutes Release

  • No disagreement between FOMC members.
  • Fed to introduce further rate hikes.
  • USD remains solid.

The trading week began on holiday, with the US celebrating Independence Day. That saw the primary economic events planned for the initial trading week delayed.

Meanwhile, market players didn’t learn what the FOMC (Federal Open Market Committee) members debated during their previous summit three weeks ago.

Naturally, minutes published yesterday were optimistic for the United States dollar as they confirmed more tightening in the coming period. So, here are takeaways from yesterday’s FOMC minutes:

  • No disagreement between officials.
  • The United States to keep hiking rates.
  • USD to remain bid.

No Disagreement Between Officials

Generally, disagreements pop up in each FOMC meeting. The narrative was different this time. Everyone supported rate hikes to restrictive levels and inflation to drop to the Federal target soon.

Fed to Continue Monetary Policy Tightening

The minutes highlighted that the Federal would unlikely change its stance as far as fiscal policy is concerned. The US fed has hiked the funds’ rate in 2022. And it will maintain similar moves in June, adding a 75 basis point over the month.

Market players expect another 75bp or 50 basis point rate rise for July. Moreover, yesterday’s minutes confirmed either of them is inevitable, but it does not matter as far as rate differential is concerned.

The interest rate differential between central banks in leading economies and the Fed continues to increase even if the Federal goes for a 50pb hike. Therefore, the US dollar will likely see continued investor appetite.

USD Demand to Remain Strong

The United States dollar saw sharp surges in 2022. The currency squeezes short sellers while offering the Fed an excuse to keep stiffening policy as steady dollars help amidst surging prices.

For instance, the European Central Bank should set financial policy as inflation nears the US rate. However, the euro maintained declines and remained extremely weak.

The dollar will stay solid as the Federal hints at more rate hikes. Thus, market players may anticipate a continued higher dollar squeeze during summer and the year’s second half.

Stay tuned for upcoming financial news.

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