According to the FOMC minutes, there has been a welcomed improvement in financial conditions with many market functioning indicators returning to pre-pandemic levels and “purchases were conducted at the minimum pace directed” as a result.
FOMC minutes – Looking forward, there could be potential for more currency volatility across major US Dollar currency pairs. The upcoming release of monthly PMI data – a leading indicator used to gauge economic activity – stands out as one scheduled event that may create turbulence for USD price action. Better-than-expected PMI readings could restore market sentiment and risk appetite, which might weigh negatively on the Greenback.
Conversely, evidence that the US and global economy are stalling as the coronavirus pandemic lingers could help ignite a larger reversal by the US Dollar. Options-implied trading ranges are calculated using 1-standard deviation (i.e. 68% statistical probability price action is contained within the implied trading range over the specified time frame).
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US central bankers appeared to back off from an earlier readiness to clarify their guidance on the future path of interest rates when they met in July.
“With regard to the outlook for monetary policy beyond this meeting, a number of participants noted that providing greater clarity regarding the likely path of the target range for the federal funds rate would be appropriate at some point,” according to minutes published Wednesday of the Federal Open Market Committee’s July 28-29 meeting, conducted via video conference.
That’s a subtle change from the previous set of minutes indicating policy makers were keen to sharpen their so-called forward guidance “at upcoming meetings.” The FOMC next gathers on Sept. 15-16.
Less Need
Since the last meeting a number of Fed officials have indicated there is less need to offer new guidance so long as the coronavirus is significantly holding the economy back.
Stocks erased gains and the dollar rose after the release of the minutes.
