Can FOMC Minutes Revive the Dollar Rally?

Analyzing through printed out stock data

Market Drivers November 18, 2015

Broadbent comment lift cable a bit

EUR tries to run 1.0700

Nikkei 0.09% Eurostoxx -0.82%

Oil $41/bbl

Gold $1070/oz

Europe and Asia:

AUD Wage Price Index 0.6% vs. 0.6%

North America:

USD Building Permits 8:30

USD FOMC Minutes 14:00

Since the start of the week FX markets have been at a virtual standstill with ranges in most majors contained to less than 50 pips over the past 48 hours. Tonight's price action absent any economic data at all continued this stall as traders awaited FOMC minutes due later in North American trade.

In UK MPC member Broadbent provided a small temporary lift to cable when he noted that markets should not place too much credibility on yield curves in order to gauge rate hike dates for liftoff. His statement that market interpretation of UK inflation data was misplaced suggested that the BoE may be more hawkish than consensus view but he did note that the fall in commodity prices did buy policymakers some time before they were forced to act, reinforcing the view that the BoE is unlikely to begin normalizing rates until Q1 of 2016 at the earliest.

Cable popped towards the 1.5250 level but the rally stopped just short of that level and the pair fell back to 1.5225 in mid morning London dealing.

In Europe there was more geo-political news from France as authorities there raided more suspected terrorist locations resulting in two deaths and multiple injuries for police. The markets however saw no reaction to the news and EUR/USD actually tried to stage a rally but again like cable ran out of momentum ahead of the 1.0700 figure.

For currency traders the key question continues to be whether the Fed will finally pull the trigger on rates in December. Since the most recent economic data has been mixed, it has sown just enough doubt to stop the dollar rally in its tracks. The EUR/USD has found support ahead of the 1.0600 level while USD/JPY has stalled above the 123.50 zone.

Today's FOMC minutes therefore could provide a clue to Fed's actions in December. If the tone of the minutes suggests that policy makers are on the verge of tightening the stalled dollar rally could get a nudge in late US trading. If on the other hand the minutes show little inclination to tighten policy the markets could start a multi-day short covering rally with EUR/USD possibly squeezing to 1.10 while USD/JPY falls to 121.00 as sentiment once again shifts.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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