The US dollar traded lower against its major peers today following yesterday’s release of dovish minutes of the latest Federal Reserve’s policy meeting. The greenback was attempting to hold its ground immediately after the release, but buckled during the current trading session.
The minutes showed that US policy makers were concerned about developments in the global economy, particularly in China, and their impact on the economy of the United States. As a result, the Fed noted, markets expect more gradual policy firming:
The expected path of the federal funds rate implied by market quotes on interest-rate derivatives moved down notably after year-end; the turbulence in global financial markets evidently led investors to expect a more gradual increase in the target range for the federal funds rate than they had previously anticipated.
It is important to remember that the Fed is still planning to continue monetary tightening, though its pace will depend on economic data:
While participants continued to expect that gradual adjustments in the stance of monetary policy would be appropriate, they emphasized that the timing and pace of adjustments will depend on future economic and financial market developments and their implications for the medium-term economic outlook.
Talking about economic data, yesterday’s data was good enough to support the dollar. Yet the supportive power of the positive reports waned as traders wait for the next bunch of indicators due to release today, and in the meantime the dovish outlook took hold of the market.
EUR/USD rose from 1.1127 to 1.1149 intraday but retreated back to the opening level as of 10:43 GMT today. GBP/USD advanced from 1.4287 to 1.4310, bouncing from the daily low of 1.4256. USD/JPY went down from 114.08 to 113.86.
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