FOMC Meeting Minutes Preview: Hawks to ventilate frustration, triggering dead-cat US Dollar bounce
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UPGRADE- The Federal Reserve's minutes from its latest decision are set to keep an open door to hiking.
- Investors are in an upbeat mood, and are unlikely to change course ahead of Thanksgiving.
- Any bounce in the US Dollar may serve as a buying opportunity.
A microwave dinner can be tasty – the Federal Reserve (Fed) "warms up" the protocols from its rate decisions before sending them to markets. It knows they are watching. That makes the event significant – and may also provide an opportunity for traders.
Here is a preview for the Federal Open Markets Committee (FOMC) Meeting Minutes on Tuesday at 19:00 GMT.
The minutes are from the November 1 decision, in which the Fed left interest rates unchanged for the second time in a row, but vowed to increase borrowing costs if needed. Markets did not believe it. Since then, soft Nonfarm Payrolls (NFP) and a welcome decline in the Consumer Price Index (CPI) vindicated investors' conviction that the Fed is done raising rates.
However, the consequent drop in US Treasury yields and the rally in stocks were not what the world's most powerful central bank wanted to see. If the public expects rates to fall, it might increase economic activity and push inflation back up.
As hinted earlier, the Fed revises the minutes from its meeting, putting emphasis on some topics and downplaying others, in order to convey a message to markets. I expect this message to be hawkish, putting the emphasis on the few who want to raise rates in December and leave them at high levels for longer.
Markets are watching and are set to react by selling risky assets such as Gold and stocks, while propping up the safe US Dollar. After long days of an upbeat market mood, there is room for a correction.
Nevertheless, I think any alarm will prove short-lived. As the Fed has stated over and over again, it is data-dependent, and the figures point to a softer economy and strong disinflationary forces.
Therefore, any correction will likely be just that – a correction with the broader trend, which is favorable to risk assets and unfavorable to the Greenback.
- The Federal Reserve's minutes from its latest decision are set to keep an open door to hiking.
- Investors are in an upbeat mood, and are unlikely to change course ahead of Thanksgiving.
- Any bounce in the US Dollar may serve as a buying opportunity.
A microwave dinner can be tasty – the Federal Reserve (Fed) "warms up" the protocols from its rate decisions before sending them to markets. It knows they are watching. That makes the event significant – and may also provide an opportunity for traders.
Here is a preview for the Federal Open Markets Committee (FOMC) Meeting Minutes on Tuesday at 19:00 GMT.
The minutes are from the November 1 decision, in which the Fed left interest rates unchanged for the second time in a row, but vowed to increase borrowing costs if needed. Markets did not believe it. Since then, soft Nonfarm Payrolls (NFP) and a welcome decline in the Consumer Price Index (CPI) vindicated investors' conviction that the Fed is done raising rates.
However, the consequent drop in US Treasury yields and the rally in stocks were not what the world's most powerful central bank wanted to see. If the public expects rates to fall, it might increase economic activity and push inflation back up.
As hinted earlier, the Fed revises the minutes from its meeting, putting emphasis on some topics and downplaying others, in order to convey a message to markets. I expect this message to be hawkish, putting the emphasis on the few who want to raise rates in December and leave them at high levels for longer.
Markets are watching and are set to react by selling risky assets such as Gold and stocks, while propping up the safe US Dollar. After long days of an upbeat market mood, there is room for a correction.
Nevertheless, I think any alarm will prove short-lived. As the Fed has stated over and over again, it is data-dependent, and the figures point to a softer economy and strong disinflationary forces.
Therefore, any correction will likely be just that – a correction with the broader trend, which is favorable to risk assets and unfavorable to the Greenback.
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