US Dollar Index consolidates gains after Fed minutes

  • FOMC minutes helped US Dollar recovery. 
  • DXY headed toward first gain since Dec 22. 

The greenback rose further after the release of the FOMC minutes. The rise was modest but it helped the USD consolidate daily gains. The US Dollar Index rose to 92.25, hitting a fresh daily high and then pulled back modestly. As of writing it was hovering around 92.10/15, up 0.32% for the day.

The minutes showed that “several officials” were concern about low inflation expectations. The majority expected inflation to rise to 2%. Officials debated over reasons to speed up or to slowdown rate hikes. A faster inflation coming from tax cut could be a reason to seed up rates hikes. 

“The minutes of the December 12-13 meeting of the FOMC confirmed that despite squeezing in a third rate hike before the end of the year, the Committee was still puzzled by low inflation. Many participants indicated that they expected cyclical pressures associated with a tightening labor market to show through to higher inflation over the medium term”, said analysts from Rabobank. According to them, the Fed will skip March as an opportunity for the first hike in 2018; instead, they expect one hike in June and another in December.

Levels to watch 

The DXY is about to post the first daily gain in more than a week. The slide found support around the strong 91.75/80 zone. A confirmation below could clear the way to more losses with potential targets at 91.45 and 91.00/05 (2017 lows). 

The minutes helped the index consolidate gains. The bearish pressure persists but the negative tone eased compared to previous sessions. To the upside, above 92.20/25, the next resistance levels might be seen at 92.50 and 92.70/75.