US: FOMC minutes and ISM non-manufacturing survey in focus – MUFG
|Lee Hardman, Currency Analyst at MUFG, suggests that the US dollar has benefitted from the Brexit vote boosting its relative appeal especially against European currencies.
Key Quotes
“However, the Fed will draw some comfort that broad-based US dollar strength has been more modest than some feared. US financial conditions have not tightened materially so far helping to limit the initial negative Brexit vote shock for the US economy.
Still, the US interest market is more fearful that it will have a more significant negative impact on the US economy and thereby dovish impact on Fed policy which is now not expected to resume raising rates until after next year. The more dovish outlook for Fed policy is helping to dampen upside for the US dollar in the near-term.
The release today of the latest FOMC minutes from their mid-June meeting are expected to reiterate that the Fed is in no hurry to resume rates hikes in the near-term, and imply that the Fed will require even more time to re-assess the outlook for the US economy and policy following the Brexit vote.
Prior to the Brexit vote, the Fed’s updated projections signalled that it was planning to raise rates at least one more time this year which appears less likely now but not completely ruled out. The release of the ISM non-manufacturing survey for June will also be watched closely today to assess if the US economy is regaining a firmer footing after the weak start to the year. The employment sub-component has been worryingly weak heightening concerns over the health of the domestic economy. A rebound in the employment sub-component would bring some much needed relief. Another weak non-payrolls report poses the main downside risk for the US dollar in the near-term.”
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