Fed Minutes to give further insights into the timing of a policy pivot
- The Minutes of the Fed’s June 11-12 policy meeting will be published on Wednesday.
- Details of Jerome Powell and Co’s hawkish hold and their inflation outlook will be scrutinized.
- Markets wager a roughly 67% chance of a Fed interest-rate cut in September.
The Minutes of the US Federal Reserve (Fed) June 11-12 monetary policy meeting will be published on Wednesday at 18:00 GMT. Investors will scout for details into the Fed’s hawkish hold and policymakers’ outlook on inflation to gauge the timing of the expected interest rate cut this year.
Jerome Powell admits disinflation progress, a September cut likely?
The Fed maintained its monetary policy settings for the seventh consecutive meeting in June, as widely expected. In its policy statement, the US central bank said that “while inflation has slowed recently and the jobs market has become more balanced this year, the uncertain economic outlook keeps the Fed “highlight attentive to inflation risks”.”
“Summary of Economic Projections (SEP), the so-called Dot Plot, broadly met expectations with a higher inflation forecast for 2024 and less easing this year; The median FOMC member called for one 25 basis point cut by the end of this year and four 25 basis point cuts in 2025,” the policy statement read.
In the post-meeting press conference, Fed Chairman Jerome Powell noted that “we need further confidence, more good inflation readings but won’t be specific about how many to start rate cuts. We’ll also be looking at a balance of risks, and outlook as well.” “Unexpected weakness in the labor market could also call for a response,” Powell explained.
Just a few hours before the Fed policy announcement, the US Bureau of Labor Statistics published the May inflation report. Data showed that the core Consumer Price Index (CPI) increased 0.2% on the month and 3.4% from a year ago, compared with respective estimates of 0.3% and 3.5%.
Since the May inflation report and the June policy announcement, several Fed policymakers remained wary about the inflation outlook, suggesting that the rates could stay ‘higher for longer’.
However, dovish Fed bets returned on the table after data on June 28 showed that the core Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation measure, rose at an annual pace of 2.6% in May after advancing 2.7% a month before. May’s inflation readings were in line with economists’ expectations.
Fed Chairman Jerome Powell’s much-awaited comments at the European Central Bank (ECB) Forum on Central Banking in Sintra on Tuesday added to the Fed rate cut expectations. Powell acknowledged the recent progress in disinflation, which was perceived as dovish even though he quickly added he wanted to see more before being confident enough to start lowering interest rates.
Currently, markets see a 67% chance of the Fed lowering rates in September, a tad higher than about 63% seen before Powell’s commentary.
Previewing the Fed’s publication, “Wednesday’s FOMC minutes will also shed light on the Fed’s more cautious stance at the June meeting, though SEP projections might prove to be already somewhat stale,” TD Securities analysts said.
When will FOMC Minutes be released and how could it affect the US Dollar?
The Fed will release the minutes of the June 11-12 policy meeting at 18:00 GMT on Wednesday. Investors will keep a close eye on any hints on the timing of the policy pivot, especially after the ongoing disinflationary trend and dovish Fed Chair Powell’s remarks.
In case the Minutes show that policymakers continued to warrant caution on inflation, pushing back against aggressive Fed rate cut expectations while justifying a single rate cut later in the year, the US Dollar (USD) could stage a comeback against its major rivals. If the publication suggests that officials express their optimism on the encouraging progress in inflation, risk flows could regain momentum and weigh negatively on the USD.
Dhwani Mehta, Asian Session Lead Analyst, shares a brief technical outlook for the US Dollar Index (DXY):
“The US Dollar Index has been in a consolidative phase after retreating from two-month highs of 106.13, with risks likely to the upside amid a 21-day and the 50-day Simple Moving Averages (SMA) bullish crossover. The 14-day Relative Strength Index (RSI) stays firm above the 50 level, near 56.30, adding credence to the bullish potential. In case the index finds acceptance above the 106.00 threshold, a retest of June highs at 106.13 cannot be ruled. The next upside target is seen at the 106.50 psychological mark.”
“On the flip side, if the 21-day SMA support at 105.37 gives way, a test of the 50-day SMA at 105.17 will be inevitable. A sustained move below that level could fuel a fresh downtrend toward the 100-day SMA at 104.76.”
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.15% | -0.11% | 0.23% | -0.04% | -0.13% | -0.07% | -0.01% | |
| EUR | 0.15% | 0.06% | 0.37% | 0.11% | -0.04% | 0.10% | 0.15% | |
| GBP | 0.11% | -0.06% | 0.33% | 0.05% | -0.08% | 0.05% | 0.08% | |
| JPY | -0.23% | -0.37% | -0.33% | -0.27% | -0.39% | -0.20% | -0.31% | |
| CAD | 0.04% | -0.11% | -0.05% | 0.27% | -0.13% | -0.02% | 0.03% | |
| AUD | 0.13% | 0.04% | 0.08% | 0.39% | 0.13% | 0.13% | 0.18% | |
| NZD | 0.07% | -0.10% | -0.05% | 0.20% | 0.02% | -0.13% | 0.04% | |
| CHF | 0.00% | -0.15% | -0.08% | 0.31% | -0.03% | -0.18% | -0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.