When are the FOMC minutes, and how could it affect EUR/USD?

On Wednesday, May 24, the US Federal Reserve (FED) will release the latest monetary policy meeting minutes of the Federal Open Market Committee (FOMC) at 18:00 GMT, sought by traders as they would provide insight into the US central bank’s forward path.

On May 2-3, the US Federal Reserve (Fed) decided to raise rates by 25 bps, the tenth increase to the Federal Fund Rates (FFR) since the Fed began its tightening cycle on March 2022. Nevertheless, it was perceived as a dovish hike, as the Fed Chair Jerome Powell and Co. opened the door for a pause. Since then, Fed officials have had split views about a pause or another increase, as there lies uncertainty about how much tightening is needed.

It should be said that different postures around Fed officials have emerged after the May meeting. On the dovish side, some policymakers emphasized that monetary policy acts with a lag and that pausing could provide clues about the economy’s performance amidst an aggressive tightening cycle. On the other hand, there have been expressions that additional tightening is needed and that it is too soon to declare victory on inflation, even though data has shown signs of the economy’s deceleration.

How Could It Affect EUR/USD?

Given that the EUR/USD is trading with a bearish tone in the week, the minute’s resumption of a hawkish posture, like the Fed’s looking higher for longer, could keep the EUR/USD skewed to the downside. Therefore, the EUR/USD pair might hit a new weekly low during the day, beneath 1.0748.

However, the fall could be cushioned even though the latest Eurozone (EU) data showed deterioration in Germany, as shown by its S&P Global PMIs May figures, alongside a weak IFO survey on Business Climate, sliding below the market’s expectations. Nevertheless, the divergence between central banks, with the European Central Bank (ECB) expected to raise rates twice for the foreseeable future while the Fed appears to have peaked, might keep the EUR/USD afloat before testing lower price levels, like the 200-day Exponential Moving Average (EMA) at 1.0683. On the other hand, if minutes lean dovish, the EUR/USD pair could reclaim the 1.0800 and pare some of its weekly losses.

Key Notes

• FOMC Minutes Preview: The complicated task of searching for clues
• EUR/USD Forecast: Bulls fight back but have little chance of winning the battle

About the Federal Reserve Open Market Committee (FOMC) minutes

FOMC stands for The Federal Open Market Committee that 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.