Fed minutes may provide another reason to buy the USD

[MongiIG]

It's the release of the minutes of the Fed's last rate meeting at which it left the Federal Funds Rate on hold. The pause in rates followed a run of consecutive rate hikes at every meeting since March 2022.

 

 Jeremy Naylor | Analyst, London | Publication date: Wednesday 05 July 2023 

The updated economic projections suggest rates may reach 5.6% by year-end, thus suggesting two more increases. Fed Chair Jerome Powell recently reinforced the view that the board is leaning towards two rate hikes and hasn't ruled out consecutive-meeting rate increases. The latest economic projections from the Fed indicate that the fed funds rate is expected to gradually fall to 4.6% in 2024.

(Video Transcript)

Fed minutes

It's the release of Federal funds minutes of the last meeting show that we saw the Federal Reserve (Fed) keep interest rates on hold following the Independence Day holiday. As it does, the release today will force people back to their desks, I guess bringing them back to reality after what's a long weekend for many been. The pause in rates followed a run of consecutive rate hikes at every meeting since March 2022.

The updated economic projections suggest rates may reach 5.6% by year's end, thus suggesting more rate increases. The Fed chair, Jerome Powell, seen here recently reinforcing the view that the board is leaning towards two rate hikes and hasn't ruled out consecutive meeting rate increases, The latest economic projections from the Fed indicate that the Fed funds rate is expected to gradually fall to 4.6% in 2024.

USD

Let's show you what's happening with the USD. This is the dollar basket up for a third day in a row today. Despite the fact we saw the US markets out yesterday, money was going into the dollar, and I think the minutes may reveal the board's intention is to keep interest rates higher for an extended period of time, with a rate hike possibly delayed until the end of the first quarter or second quarter of 2024 if inflation falls towards that desired trajectory.

EUR

Let's take a look at the EUR very quickly, all the way down, not quite as low as we've been in the last week or so, but at 1.77 looking weak. So, if you're selling euros at the expense of the USD, your stock goes up above the 110 level, currently trading at 1 to 876.