The Federal Open Market Committee (FOMC) minutes, of the 29-30 October meeting, will be released on Wednesday at 19:00 GMT. At that meeting, the Federal Reserve (Fed) cut the Fed Funds rate for the third time since 2008 to between 1.5% and 1.75%. The decision was not unanimous with two FOMC members dissenting. Boston Fed President Eric Rosengren and Kansas City Fed President Esther George wanted to keep rates unchanged.
Key notes
At the last meeting, the Fed cut rates as expected and signaled a pause. The CME Fed Watch Tool shows odds at 100% for the Fed to keep rates unchanged at the next meeting in December and only a probability of 17% of a rate cut in January. The minutes could change those odds. Market participants will also look for how big is the division in the central bank.
Analysts at TD Securities expect the Fed to elaborate on the Committee's decision to ease rates but also to send a firm signal that the bar for additional accommodation is a high one right now. “We anticipate discussions to touch upon what "material reassessment" of the outlook would lead the FOMC to shift its policy stance. The minutes may also provide further insights into the Framework Review debate. In particular, we may get some observations on the relative merits of average inflation targeting. Finally we think we could see some discussion appropriate size of the balance sheet and how to manage intraday liquidity going forward.”
Room for major surprises appear to be limited considering that last week Chairman Powell spoke at the US Congress for several hours and also other FOMC members delivered public speeches having practically no influence on markets.
Implications for EUR/USD
The EUR/USD spiked at 1.1175 the day after the FOMC meeting, the highest level in two months. It failed to break above 1.1180 and turned to the downside. Last week bottomed at 1.0989 but it was rejected from under 1.1000. Currently it is hovering around the 20-day moving average at 1.1070. Over the last three days it moved in a price range of 40 pips.
Volatility could pick up with the minutes. On the upside, the critical short-term resistance is seen at 1.1100. A close above would signal more strength ahead for the euro. On the flip side, a slide back below 1.1020 will likely expose the 1.1000 area and last week lows. A break lower would point to further losses with a potential target at 1.0950.
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.
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