US Dollar Vulnerable to Less Hawkish FOMC Minutes


US Dollar Talking Points

The US Dollar Index (DXY) bounces again from a recent month-to-month low (104.64) because it makes an attempt to retrace the decline following the slowdown within the US Consumer Price Index (CPI), however the Federal Open Market Committee (FOMC) Minutes might drag on Greenback ought to the central financial institution present a better willingness to implement smaller charge hikes.

Technical Forecast for US Dollar: Neutral

DXY fails to defend the opening vary for August as indications of slowing worth development curb bets for an additional 75bp Fed charge hike, and the index might proceed to trade to recent month-to-month lows if the FOMC Minutes level to a change within the central financial institution’s method in combating inflation.

The assertion might present a rising dialogue to winddown the hiking-cycle after pushing the Federal Funds charge to impartial, and the central financial institution might ship smaller charge hikes over the approaching months as Chairman Jerome Powell acknowledges that “it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation.

In flip, the US Dollar might face further headwinds over the approaching days if the FOMC Minutes foreshadow a change within the ahead steerage for financial coverage, however extra of the identical from the central financial institution might lead to a bigger rebound within the Greenback as Chairman Powell insists that “another unusually large increase could be appropriate at our next meeting.”

With that stated, the FOMC Minutes might affect the near-term outlook for the US Dollar as indicators of slowing inflation solid doubts for an additional 75bp charge hike, and little hints of a looming shift in Fed coverage might prop up the Greenback because the central financial institution carries out a restrictive coverage.

— Written by David Song, Currency Strategist

Follow me on Twitter at @DavidJSong

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