Market Reacts to FOMC Minutes: Dollar Strengthens as Yen Emerges Dominant

By Tomasz Wisniewski|

Published: July 06 2023, 06:12 GMT+0

Market Reacts to FOMC Minutes: Dollar Strengthens as Yen Emerges Dominant

The U.S. Federal Open Market Committee (FOMC) minutes released on Wednesday revealed critical insights that set the tone for the market’s reaction. The most pivotal points showed that almost all Fed members see more rate hikes in 2023, and they predict a mild recession in the second quarter. Members favoring an increase highlighted factors such as a very tight labor market, stronger-than-anticipated economic momentum, and little evidence of inflation returning to the 2% target over time.

In response, the American dollar gained strength, one of the very few currencies to do so on Wednesday. This strength carried over into Thursday’s trading as well, though there was a small correction. For instance, the EURUSD pair is currently hovering near monthly lows.

Interestingly, the Japanese yen has emerged as the strongest currency at the moment, suggesting a potential reversal in the market. Pairs with yen, such as USDJPY and CADJPY, saw significant drops.

Turning our attention to the indices, a noticeable correction is taking place. Some indices, such as DAX, are witnessing a worrying trend as they mark their fourth bearish day in a row. The price pattern appears to be forming the right shoulder of a head and shoulders pattern, which signals a possible trend reversal.

Commodities, on the other hand, are experiencing a gradual yet steady rise. The sentiment among commodities, however, remains negative overall. Gold, for instance, had the opportunity to trigger a strong buy signal on Wednesday, but it failed to do so.

Looking ahead, Thursday’s calendar is packed with significant events. It will be the second day of OPEC meetings, which could bring essential news for oil. Other important data releases are expected before or during the American session. These include the ADP non-farm employment change, initial unemployment claims, ISM services PMI, and JOLTS job openings. All of these could potentially impact the American dollar. Therefore, traders and investors should keep a close eye on these developments as they unfold throughout the day.