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FOMC Minutes Show Fed in No Rush
The US Dollar continues to push higher today, with the Dollar Index back up to its highest levels since mid-August. Last night, the FOMC minutes did little to deter USD bulls. The Fed seen to show little concern over the need to bring rates down quickly, despite cutting by a larger amount. This initial .5% cut was seen as an effective way to recalibrate monetary policy given trends in employment and inflation, though some preferred a smaller .25% cut. Indeed, the minutes show that there was plenty of division over how much the Fed should cut rates this year with 10 policymakers in favour of 1% or more of cuts and 9 in favour of .75% or less of cuts.
Inflation & Jobs
While most FOMC members agreed that the risks from inflation had subsided materially, the bigger risk is now seen from employment. In the September economic forecasts, H2 growth was marked down as a result of softer employment while the unemployment rate was revised higher. Since then, however, last week’s robust jobs data will likely have assuaged some of these fears.
US Inflation Next
Looking ahead, focus today will be on the latest set of US inflation figures. Headline annualised CPI is expected to tick down to 2.3% last month from 2.5% prior. If seen, this shouldn’t have too much impact on USD today. However, if we see any stickiness at prior levels, or a fresh rise, this should amplify the USD rally near-tern. On the other hand, a downside surprise today could well bolster near-term easing expectations again, sending USD back down.
Technical Views
DXY
The DXY is now testing above the 102.46 level and retesting the underside of the broken bull trend line. This is a key pivot for the market and above here, focus will be on the 104.05 level next. To the downside, 100.93 remains key support.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.