When are the FOMC minutes and how could they affect DXY?

The US FOMC minutes will be released on Wednesday at 18:00 GMT. At that meeting, the Federal Reserve, decided by a 9 to 1 vote, to raise interest rates to the 0.75% - 1.00% range. 

Key notes

Today the ADP employment data surpassed expectations but then the PMI and ISM service sector reports, declined more than expected, still holding well above 50.0 line, that marks the limit, between expansion and contraction. The numbers pushed Fed rate hikes expectation to the upside. According to the CME Group FedWatch Tool, the odds of a June rate hike are about 63.4% today up from 58.9% of yesterday. The minutes could affect the odds. 

“There will be two important aspects of the FOMC minutes that will attract attention.  First, the Fed will introduce confidence cones around its forecasts.  This may help investors have a better appreciation for the forecasts, and surely why they are not point-specific promises.  Second, the FOMC likely had its first formal discussion of the balance sheet. The key issue for the market is when and how it will be addressed”, said analysts from Brown Brothers Harriman. 

FOMC minutes in the limelight – BBH

US: FOMC Minutes and ADP employment in focus – Danske Bank

Implications for DXY

Since last Friday, the US dollar index is consolidating, below 100.60 and on top of 100.00. It is at the highest levels since March 15, the day of the FOMC meeting, but still, below the level it had before the release of the statement and the decision, that triggered a decline of the USD.

If the minutes show new information, that pushes interest rate hike expectations to the upside or if it points to an acceleration of the tightening cycle the US dollar could rally in the market, sending the DXY to break the 100.55/60 barrier. A consolidation on top could lead to a test of a downtrend line coming from 2017 highs that currently stands around 101.30/40. 

The greenback could suffer in the market if the minutes are taken as “dovish”, pointing to a slowdown in the tightening process. If that is the case, the current upside bias in the DXY could come under pressure. A decline below 100.00, could clear the way for an extension to 99.70. 

About the 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.