The FOMC Minutes Outlook You Need To Know

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The FOMC Minutes Are Here, But Do They Matter?

The FOMC Minutes Not Expected To Move Markets

The FOMC Minutes are at hand once again and may move the market. I mean, they sometimes move the market but this week probably won’t be one of them. The FOMC has indicated they are patiently waiting for data to lead them in their policy choices. The data so far shows a robust U.S. economy with very little inflationary pressure. Those pressures may change soon as trade woe and tariffs worm their way into the economy but not yet. This week the minutes are likely to reveal more of the same, a patiently waiting Fed.

The market, despite Jerome Powell’s hints to the contrary, is expecting a rate cut by the end of the year. The odds are now standing at 75% for at least one cut by December, possibly two or even three if the economy tanks. The Dollar Index has been edging higher in the last few weeks and is now sitting just below a resistance target. This target is just below the recent high at $98 and may contain the index until the minutes are released. Upon the release the index may move higher provided the FOMC is still bullish on the economy.

The risk is that the minutes may reveal a more-cautious than expected Fed and that could be bad for the market. If the Fed gets too cautious odds for a rate-cut will increase and the dollar is likely to weaken. Regardless, the index is expected to trend sideways longer-term. The key support and resistance targets at this time are $97.50/the 30-day EMA and $98.25/the recent high. A move to either is an opportunity to fade the market but I’d wait until after the minutes are released before opening such a trade.

The EUR/USD May Move Lower

The EUR/USD is poised to move lower but that move may be halted by support at the 1.1200 level. Price action and technical indication are bearish so a downward movement is the most likely scenario. Support may be reinforced or weakened by the FOMC minutes or data due out from the EU. EU data due out this week includes consumer confidences, Manufacturing PMI, and EU parliamentary elections on Friday.

The GBP/USD May Also Move Lower

The GBP/USD may also move lower and let me tell you, this chart looks a lot more bearish. The GBP/USD has been in a steady downdraft for over two weeks and doesn’t show any signs of slowing. The indicator are both bearish and support lower prices as does last week’s break below support. Support at 1.2800 was shattered and open up 1.2600 and 1.2400 as targets. This week there is quite a bit of UK data so look for some volatility in the least.

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The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system.

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The FOMC holds eight regularly scheduled meetings during the year and other meetings as needed. Links to policy statements and minutes are in the calendars below. The minutes of regularly scheduled meetings are released three weeks after the date of the policy decision. Committee membership changes at the first regularly scheduled meeting of the year.

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FOMC Meeting Minutes Released Today: What Investors Must Know Now

By Diane Alter , Contributing Writer , Money Morning • August 17, 2020

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Investors around the world anxiously awaited the release of the July FOMC meeting minutes today (Wednesday, Aug. 17).

While we already know the Fed left interest rates unchanged last month, the minutes help us understand what to expect at the September FOMC meeting.

Here are the biggest takeaways from the FOMC minutes – and what investors should expect from the Fed this year…

What You Need to Know from Today’s FOMC Meeting Minutes

The key takeaway from the minutes is several Fed officials believe interest rate accommodation will need to be eased. Members generally agreed they should raise interest rates if economic data improves in the coming months.

The Federal Reserve minutes also showed how central bank members were generally upbeat about the U.S. economic outlook and labor market. Still, many officials said a slowdown in the future pace of hiring would argue against a near-term interest rate hike.

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The minutes revealed some officials want to wait until they’re more confident inflation will hit the 2% target. Others believed the United States is close to a fully recovered job market and a rate increase would soon be warranted.

Markets jumped after the minutes were released at 2:00 p.m. The Dow Jones Industrial Average gained 0.2%, while the S&P 500 added 0.3%. Both indexes settled back down and traded flat near market close.

The mixed opinions among officials show the minutes were neither overly hawkish nor dovish. They suggest a September rate hike is still on the table. But the Fed won’t commit to an increase until more economic data is released.

Here are the probabilities of a rate hike happening this year – and how they will influence the stock market…

How Today’s FOMC Meeting Minutes Will Affect Stocks in 2020

Many Fed officials have openly said a rate hike is possible this year.

On Tuesday, New York Fed President William Dudley said there’s a chance of a rate hike in September. Atlanta Fed President Dennis Lockhart said the economy is strong enough to withstand at least one 2020 rate hike.

Analysts still remain skeptical that the Fed will raise rates before the November election or the end of 2020.

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The Fed’s policy accommodation this year has provided a nice cushion for the stock market…

U.S. indexes have reached record highs thanks mostly to low interest rates. On Thursday, Aug. 11, the Dow Jones, S&P 500, and Nasdaq all hit their highest levels ever. That was the first time since 1999 all three indexes peaked on the same day.

The Fed raised rates for the first time in nearly 10 years last December. At the time, policymakers projected four rate hikes in 2020. But worries about the jobs market, global growth, and the UK’s vote to leave the EU gave the Fed reasons to pause.

Some of those concerns have abated, including whether markets would endure long-term volatility after the Brexit vote.

“Participants generally agreed that the prompt recovery of financial markets following the Brexit vote and the pickup in job gains in June had alleviated two key uncertainties about the outlook,” the minutes said.

Still, the odds of an interest rate increase this year are questionable…

According to the CME FedWatch tool, a move in September is still highly unlikely. After the minutes, traders placed the likelihood of rates remaining unchanged next month at 82%. That’s down slightly from 85% yesterday.

The probability of rates staying the same in November is 84.4%, compared to 83.2% heading into the minutes. For December, odds are a near coin toss of 52.3%, up from 47.5% before the minutes’ release.

The next clue regarding the Fed’s intended interest rate path will come on Aug. 26. That’s when Janet Yellen speaks at a Jackson Hole, Wyoming, conference. The conference is a gathering of central bankers from around the world and has been the venue for major Fed policy announcements.

Stay tuned to Money Morning for more updates on the Fed and interest rate policy.

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