When are the FOMC minutes and how could they affect DXY?

The US FOMC minutes, of the June 13/14 meeting, will be released on Wednesday at 18:00 GMT. At that meeting, the Federal Reserve, decided by a 8 to 1 vote, to raise rates by 25bp to the 1.00% - 1.25% range. Also, the central bank presented new economic projections of FOMC members and an addendum to the Policy Normalization Principles and Plans (about how it plans to normalize the balance sheet). 

Key notes

At the June meeting, the Fed decided, as expected, to raise rates. The US central bank surprised with some details about how they intend to reduce the 4.5 trillion balance sheet. Janet Yellen then offered a press conference and said that the normalization of the portfolio could start relatively soon if the economy evolves as expected. Overall, the monetary policy remains data-dependent. 

The minutes will show the discussion of that meeting, where a member of the FOMC, Neel Kashkari, voted against the decision to raise rates and preferred to maintain it. Analysts will look for clues about what the Fed plans to do next. “In particular, we will be attune to any details on when the new reinvestment policy could be implemented. We will also look to the discussion around the inflation outlook but caution that any consensus that disinflation is transitory could be discounted by markets, given their reluctance to price in rate hikes over the next twelve months”, wrote analysts from TDS. 

FOMC minutes to dominate – RBC CM

US: All eyes on FOMC minutes – TDS

FOMC Minutes eyed for further rate hike clues - SocGen

Implications for DXY

The dollar was modestly higher before the minutes, rising for the fourth day in a row as it recovers from 2017 lows. It was particularly higher against emerging markets currencies. A dovish tone of the minutes would tend to weaken the greenback, while a hawkish bias could boost it. 

“Expect the minutes to further underline the message that balance sheet reduction is not seen as a substitute for higher rates, which would be positive-USD (as was the announcement on the day of the meeting)”, said analysts from RBC. 

The US Dollar index rose today above 96.00. The next resistance to the upside, is the 96.45/50 area, that some weeks ago was a relevant support. That area is also near the 20-day moving average. So a consolidation on top, could add more strength to the recovery. 

If the minutes fail to impress dollar bulls, the DXY could bounce to the downside, in line with the still dominant bearish trend. Below 96.00, the immediate support could be seen at 95.70/75 (Jul 4 low / 20-SMA in 4-hour chart), followed by 95.25 and then, 2017 lows at 95.18 would be exposed. 

About the FOMC minutes

FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.