‘Prudent’ Fed Policy; Aussie Jobs Next
Initial FOMC Minutes headlines highlighted a 'split' amongst Fed voters but a closer look at the text showed a Fed patient and prudent Fed. The Canadian dollar was the top performer Wednesday while AUD lagged. The Australian jobs report is due up next. A 2nd trade in an equity index was issued today.
The dollar initially fell on FOMC Minutes headlines as news outlets played up divisions but the text showed only a 'couple', 'some' or 'a few' FOMC members with hawkish concerns. Those are code words for 2-5 members and only 'a couple' were prepared to support a hike along with George, who voted in favour of raising rates.
As Ashraf highlighted, a key concern for Fed doves is inflation or the lack thereof. Another is poor business investment. The Minutes emphasized that it was 'prudent' to accumulate more data. That's probably the best word to describe the Fed's stance at the moment. A less generous term might be 'shy' after repeatedly failing to deliver on hawkish talk.
In terms of market moves, the US dollar slumped after the Minutes and the implied probability of a Sept hike fell to 18% from 22%. EUR/USD initially jumped to 1.1316 from 1.1260 but was unable to break Tuesday's high of 1.1323 and gave back half the gains.
The Australian dollar is in focus next with the jobs report due at 0130 GMT. The consensus is for 10K new jobs but watch the breakdown of full and part time jobs. The unemployment rate is forecast to remain unchanged at 5.8%.
AUD/USD slumped to a two-week low of 0.7605 on Wed but recovered to 0.7656 at the close. Overall, the pair remains near the top end of the four month range but the recent volatility ahead of the April high is worrisome.
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