The minutes to the end of October Fed meeting, released last night, did not have a major market impact, but did reveal some fairly detailed discussion about the language to be used in the statement and the extent to which it should lead market thinking into a December move. The dollar wobbled, but was net-net little changed. In the bigger picture, the one thing the Fed has stressed is the nature of the tightening cycle and moving this more towards the market thinking in their projections. What could be just as important as the move is the strength of the forward guidance on further hikes, as the Fed wants to ensure that expectations do not run away for 2016. This would risk powering another major dollar rally and risk of a reversal of a December hike in 2016.
Elsewhere in FX, the Aussie has been holding up notably well over the past week of dollar strength against both the majors and emerging markets. The yen can also do well into year end, pushing EURJPY down through the 130 level and below. The structural forces pushing the yen lower are dissipating and it appears that the BoJ does not have the appetite for more QE, with policy kept on hold overnight. Note that South Africa has a rate decision today, where there is risk that rates could rise, in part as a means to try and curtail the weaker currency.
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