FOMC Minutes Confirm Fed Hawkishness
The May FOMC minutes last night were broadly as expected. The release reaffirmed the current Fed hawkishness yet, in light of the uptick in recent Fed commentary, the minutes came across a little dated. Notably the minutes confirmed that policymakers are expecting to hike rates by a further .5% in June and July and are also open to lifting rates above the neutral level if necessary. This is something we’ve heard during recent comments from Fed chairman Powell.
With the Fed well expected to hike rates by a further 1% in the coming months. The focus at upcoming meetings will be on guidance with traders likely to be very sensitive to any signs that the Fed might deviate from its plan. We recently heard Fed’s George suggesting the Fed might look to pause after the July hike. If this idea gains any traction this might weigh on USD near term.
Market reaction to the minutes was somewhat dampened. While the minutes were undoubtedly hawkish, there was a tone of concern over the impact of inflation and the projected impact of Fed tightening which made it a difficult one to trade. For now, the bigger focus will be on today’s flash GDP reading which will give an insight into how the economy has fared over the current period.
Technical Views
DXY
For now, the Dollar Index is holding below the 102.61 level, suggesting room for a continuation lower towards the 100.93 level next. With bull channel support around that level also, this will be a key area to monitor. While this region holds, medium term focus remains on a continuation higher. A break there however, will turn things more bearish in the short term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.