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

The Federal Open Market Committee (FOMC) minutes of the 17-18 September meeting will be released on Wednesday at 18:00 GMT. At that meeting, the Federal Reserve (Fed) cut the Fed Funds rate for the second time since 2008 to between 1.75% and 2%. The decision was not unanimous, with three FOMC members dissenting. Boston Fed President Eric Rosengren and Kansas City Fed President Esther George wanted to keep rates on hold while St. Louis Fed President James Bullard favored a 50bps rate cut. 

Key notes

At the last meeting, the Fed cut rates as expected. The CME Fed Watch Tool shows that current market pricing points to a probability of 80% for another rate cut at the next meeting. Today’s minutes will be scrutinized for clues about the future path for rates and other policy options. 

“More importantly, the minutes are also likely to shed light on the Fed's thinking about the recent surges in repo market rates,” explained TD Securities analysts. However, this has been partly addressed by Chair Powell, who stated on Tuesday that the Fed "will soon announce measures to add to the supply of reserves over time,” they added. 

Joseph Trevisani, a senior analyst at FXStreet, points out the international disputes that prompted the two Fed cuts, the US-China trade war and Brexit are as lively and dangerous as they were in September. He explains the US economy has slowed substantially from its 3.1% expansion in Q1 and has been running at about 2.0% for six months while job creation has fallen by almost 100K per month since January, and business sentiment and investment has declined. “The intersection of these two poles of Fed analysis and the global concerns voiced by the governors will be the crux of the market reaction. The more worried and expressive the governors are in the minutes, the higher will the odds for an October rate cut rise.”

According to Trevisani, the market reaction will likely be stronger in the equities to any interpretation that favors lower rates with currencies and credit, having mostly factored in an October cut.

During a speech yesterday, Fed's Chair Powell left the door open to further rate cuts and mentioned that the central bank will soon increase its purchases of Treasuries to avoid new episodes of tension in money markets. The speech from Powell and all that has happened since the meeting could have left little room for surprises. 

Implications for EUR/USD

The US Dollar rose in the market after the September rate cut. EUR/USD printed a fresh low at 1.0875 last week before starting a recovery that stalled at 1.1000. Over the last hours, the pair and most majors have been trading in small ranges, so an increase in volatility could trigger interesting intraday moves. 

If the US Dollar gains momentum, amid a positive outlook from the Fed or more division about where to go with monetary policy, EUR/USD could drop toward 1.0950. A consolidation below 1.0940 would add more pressure, exposing the next support seen at 1.0925, which protects 1.0905. 

On the upside, the critical area is 1.1000, which has capped the upside over the last five days. A consolidation on top would open the door to more gains. The next resistances are located at 1.1025/30 and then at 1.1045/50.

About the FOMC minutes

FOMC stands for Federal Open Market Committee. It organizes eight meetings per year, where it 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.