The much-awaited Fed Minutes is now out. There were no major surprises in the minutes thereby extreme market volatility was not seen post the release. Market, largely had discounted the outcome of the minutes ahead of its actual release. Every Fed policymaker backed raising interest rates last month and agreed borrowing costs were set to rise further. Interest rate futures are now pricing in about 83 % likelihood that the U.S. central bank will raises rates in December for the fourth time this year.
Impact Of The Minutes On Major Quotes:
US Dollar Index: U.S. dollar index rose to its highest levels in a week after minutes from the Federal Reserve’s September meeting affirmed expectations that the U.S. central bank is likely to continue raising interest rates. Prior to the release it was trading around 95.20/30 levels and post minutes release it tested 95.66 level. It is a quite a steep jump If we consider it trading at 94.70 level this Tuesday.
EUR/USD: The pair traded around 1.1530 levels pre-release and trades at 1.1465 at the time of writing. The fall in euro is not much considering there were no major news from euro zone further affecting it either positively or negatively.
US Yield: It started to move higher after the FOMC minutes, with the benchmark 10-year yields rising from 3.17% during the event, to 3.20%. The immediate hike was not much as bond yields were already heading northwards for the past few days anticipating such outcome from the Fed minutes.
GBP/USD: Pound weakened against USD post minutes albeit the reasons was also that European Union’s chief Brexit negotiator Michel Barnier’s commented that more time was needed to secure an exit deal for Britain. Hopes for an early Brexit deal have supported the pound for the past two months. In the absence of any meaningful Brexit development the pound could come under further selling pressure. If it breaks 1.3000 levels, it is like to head further lower towards 1.2800 zone.
WTI/Brent: Oil prices fell with U.S. futures settling below $70 a barrel for the first time in a month, after U.S. crude stockpiles rose 6.5 million barrels, almost triple of the forecast. Brent has broken below psychological level of $80 and trades at $79.46 at the time of writing.
Major currencies have shown limited reaction after the Fed minutes also as the White House economic advisor Larry Kudlow stated that Trump was not demanding a policy change after the criticism on the Fed on Tuesday, when he called rising U.S. interest rates his “biggest threat.” The statement soothed the market and prevented it from steep volatility.