The Fed’s FOMC meeting minutes were released yesterday from the July 26 – 27 FOMC meeting where interest rates were left unchanged. The minutes showed that many voting members of the FOMC expect to see higher interest rates soon, but the general agreement was that more data was needed to be assessed before the Fed delivered another rate hike.
The FOMC minutes said, “Members anticipated that economic conditions would soon warrant taking another step in removing policy accommodation.” Members were broadly upbeat on the pace of the economic progress in the US and the labor market in general, but many expressed concerns that the future pace of hiring could slow down which would go against the plans for a near-term rate hike.
Following the release of the meeting minutes, investors interpreted the minutes as being moderately positive for risk assets, with the S&P500 closing modestly higher for the day, adding 4.07 points or about 0.20% higher. The Dow Jones industrial average closed 0.10% higher while the NASDAQ gained 1.55 points.
The dollar gave up its gains in the currency markets, falling to 100.282yen while early Thursday, the declines extended to touch a low at 99.64. The euro also posted gains against a weaker US dollar, but prices were seen struggling to breakout above $1.130. The yields on the 10-year US Treasury note fell to 1.558%.
Greg Gibbs, director of Amplifying Global FX Capital, said that the minutes express the member’s concerns on the downside risks to the economy. “The core decision makers expressed patience and we do not expect serious consideration of a rate hike until December. This leaves the market in a stop and go attitude towards the US dollar,” he said.
Gennadiy Goldberg, from TD Securities, said, “The (Treasury yield) curve is steepening a little bit, so it’s probably less hawkish than the market was positioned for, that’s the initial thought.”
On the economic front, data from the US remains light for the remainder of this week. The weekly unemployment claims are due later this afternoon and is expected to show the unemployment claims at 269k, slightly higher than the previous week’s 266k. The Philly Fed manufacturing index is also coming up later today with expectations looking for a headline print of 1.4 following a dip to -2.9 previously.
The US dollar is quite likely to remain weaker against its peers as investors look to the week of August 22 – 28 where important events include the durable goods orders and the second estimates of the US GDP for the second quarter. More importantly Fed Chair, Janet Yellen will be speaking at the Jackson Hole symposium which could offer more clues for investors on the prospects on the timing of future rate hikes from the Fed.
