Breaking: FOMC Minutes sink the US dollar a touch despite inflation risk skewed to the upside

FXStreet Team FXStreet

The Federal Open Market Committee minutes have been released which are so far sending the US dollar DXY index a touch softer. The softness in the greenback come as there were no discussions on larger rate hikes.

At the May 3-4 meeting, the Fed hiked rates from the expected 50 bp to 1.0% and laid out plans for aggressive Quantitative Tightening to begin in June.

FOMC Minutes

All participants at the Federal Reserves May policy meeting agreed a half-percentage-point interest rate hike was appropriate; 'most' Judged such hikes appropriate at the next couple of meetings, minutes from May 3-4 meeting show.
All Fed participants agreed the US economy was 'very strong,' labour market was 'extremely tight' and inflation was 'very high,' minutes show.
Participants agreed fed should 'expeditiously' move monetary policy toward a more neutral stance, and that a 'restrictive' stance on the policy may well become appropriate, minutes show.
Fed participants saw the Ukraine conflict, china's covid lockdowns posing 'heightened risks,' with particular challenges to restoring price Stability while maintaining a strong job market, minutes show.
Many participants judged faster removal of policy accommodation would leave the fed 'well-positioned' to assess later this year What further adjustments were needed, minutes show.
Fed participants emphasized that they were 'highly attentive' to inflation risks and agreed those risks were skewed to the upside, minutes show.
All participants supported plans to reduce the size of the Fed's balance sheet; 'a number' said after the runoff was well underway, it would be appropriate to consider sales of mortgage-backed securities, and minutes show.
Participants said Q1 2022 GDP decline contained 'little signal about subsequent growth,' and they expected real GDP would grow 'solidly' in Q2 and be near or above trend for the whole year.

Meanwhile, analysts at Brown Brothers Harriman said, ''our base case remains for another 50 bp hike in September that takes the Fed Funds ceiling up to 2.5%, which many consider close to neutral. However, it’s worth noting that odds of a 50 bp move in September have fallen to less than 50% now from fully priced in at the start of May.''

DXY reaction so far...

This was the knee jerk reaction that propelled the euro higher from support as follows, in accordance with the pre-event analysis:

EUR/USD technical analysis

Prior analysis:

For the minutes and sessions ahead, the pair could be based here and result in a higher correction from support:

The softness in the greenback come as there were no discussions on larger rate hikes.

About the FOMC minutes

FOMC stands for The Federal Open Market Committee organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

Author

FXStreet Team

FXStreet

Composed of a group of economic journalists and FX experts, the FXStreet content team produces and oversees all content published on FXStreet. It provides a purely journalistic approach to the Forex market.

GBP/USD stays weak below 1.3600 as USD bulls await Warsh's speech

GBP/USD is consolidating near the lower end of its weekly range, below the 1.3600 mark, during European trading hours on Thursday. The pair's downside, however, remains cushioned as traders await Fed Chair Warsh's speech on Friday for more cues about the US central bank's interest rate path before placing fresh directional bets.

EUR/USD holds range around 1.1650 as USD steadies

EUR/USD keeps its range around 1.1650 in the European session on Thursday. Hawkish ECB expectations support the pair as the US Dollar consolidates after the US PCE data-driven advance. The focus remains on Middle East developments and US Jobless Claims data.

Gold struggles to build on gains as traders await Fed Chair Warsh's speech for rate cues

Gold struggles to capitalize on modest Asian session gains on Thursday and remains below its highest level since May 14, touched earlier this week. Traders now seem hesitant to place aggressive directional bets and wait for US Federal Reserve Chair Kevin Warsh's speech at the Jackson Hole Symposium on Friday for cues on the future policy path. The outlook, in turn, will play a key role in influencing the US Dollar price dynamics and provide some meaningful impetus to the non-yielding bullion.

Ripple eases to $1.40, Solana hits $100, DOGE capped below $0.10

Ripple (XRP) and Dogecoin (DOGE) are facing downside pressure after double-digit gains last week, while Solana (SOL) extends its rally to $100. The technical outlook for XRP, SOL, and DOGE points to potential upside as the broader market sustains a risk-on sentiment.

Jackson Hole kicks off after upside PCE surprise

In China, industrial profits rose 17.6% y/y to CNY 4.58tn in the first seven months of 2026, slowing from an 18.7% increase in January-June. The moderation follows several months of strong profit growth around 20% y/y, supported by higher producer prices and solid manufacturing activity.

Kevin Warsh’s Jackson Hole dilemma: Say too much, too little, or just enough

Kevin Warsh is preparing to deliver his first Jackson Hole speech as Federal Reserve (Fed) Chair on Friday, and expectations extend well beyond whether interest rates will be raised or left unchanged in September.