The U.S. dollar fell from a two-week high ahead of the release of minutes for the FOMC meeting held late last year. In wednesday night's trading session, the USD Index slipped by 0.38%.
It means that the currency was in the range of 95.9. The Fed's minutes will give a good color to the thinking that they expect.
In addition, there are also some argumentative questions about the Fed's policy; It's about how many times the rate increases, how fast it tapering, and the reduction in balance sheets.
The opinion above was said by John Marley an analyst at Forexxtra. The minutes of the Fed meeting are also expected to underscore the central bank's latest sensitivity to inflation and readiness to act.
FOMC May Increase the Rates
The outlook for a rate hike pegged to the market today is by a quarter point in March and a full point in May. If the tapering had ended a few months ago, There is one prediction right now.
Recently, people can think that the FOMC will raise the interest rates. It is especially with the U.S. unemployment rate not far above the Fed's long-term target.
That is as well as the core inflation and headlines that are also well above the expectations. That opinion was written by the standard chartered analysts.
Reinforcing the current market expectations, Minneapolis Fed President Neil Kahskari said a two-year rate hike was needed to offset rising inflation. That statement contradicts the dovish view he's used to.
Kaskhari has previously mentioned that the Fed should keep the interest rates in the zero range at least until 2024. That means for about two years from now.
The December ADP employment Change Increases
Despite the expectations for the Fed, tonight's United States ADP Employment Change data failed to provide support for the strengthening dollar further.
The market shrugged off ADP Employment Change growth of 807K in December. That was occurred although the figure was higher than the expectations of 375k.
According to Nela Rihardson as an ADP's Chief Economist, the rise in the United States private sector growth is due to the fading adverse effects of the Delta variant.
The shocking thing is that there has been no significant effect of the Omicron variant. Meanwhile, the The U.S. dollar index (DXY) was steady in the 96.30s in Thursday trading.
The AUD / USD Pair Felt Down
The released of FOMC meeting minutes yesterday morning echoed the market expectations for a faster Fed rate hike. So, the greenback strengthened against most major currencies.
The AUD/USD plunged about 0.9 percent to the 0.7160s range. Meanwhile, the GBP/USD fell 0.4% to the 1,350s range based on the data released.
The New Zealand dollar, Canadian dollar, euro, and Swiss franc were also depressed against the USD. Only USD/JPY showed the opposite performance by a drop of around 0.25%
That pair went to the 115.80s range, likely because the previous strengthening had been excessive. That situation was highlighted by most of the participants.
The Rate Hike May Be Done as Soon as Possible
Minutes of the FOMC meeting dated December 14-15, 2021 revealed that Fed officials assess the "very tight" labor market. That allows for the faster rate hikes.
It was beneficial in order to tame the rate of inflation. They also signaled a willingness to implement a Quantitative Tightening (QT), which reduces the amount of assets in the Fed's balance sheet.
It is especially those that have been purchased during the Quantitative Easing program. Markets had previously factored in a greater chance for the first "Fed rate hike" in May.
There us only half the chance for March. But following the release of the minutes of the FOMC meeting, the Fed Funds Rate immediately indicated an opportunity of about 80%. It is for a 25 basis point rate hike at the FOMC meeting next March. This situation may support the USD/JPY pair.
