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Dollar Down vs. Euro as Fed Policy Minutes Look Dovish

January 6, 2016 by

Today, the dollar fell against some of its major peers, including the euro, after the Federal Reserve released minutes of its December meeting. Markets considered the minutes to be dovish, pushing the greenback down as a result. Very solid employment data was unable to help the US currency to hold ground, though it gave hope for dollar bulls that nonfarm payrolls, released on Friday, would also be strong.

ADP employment gained by 257k in December from November. The increase exceeded market expectations of 193k and the previous month’s gain by 211k. (Event A on the chart.)

US trade balance deficit shrank to $42.4 billion in November down from $44.6 billion in October. Analysts had predicted just a tiny decrease to $44.0 billion. (Event B on the chart.)

Final Markit services PMI was down from 56.1 in November to 54.3 in December, the lowest level in 11 months. While it was above the flash reading of 53.7, the indicator missed the optimistic forecasts of 55.1. (Event C on the chart.)

ISM manufacturing PMI also disappointed economists, falling from the November reading of 55.9% to 55.3% in December instead of rising to 56.0% as was predicted. (Event D on the chart.)

Factory orders were down 0.2% in November, matching forecasts exactly. The October’s increase was revised slightly down from 1.5% to 1.3%. (Event D on the chart.)

Crude oil inventories dropped by 5.1 million barrels last week but remained close to the record level for this time of year. Forecasts were nowhere near the actual reading, promising an increase by 0.7 million. The stockpiles were up 2.6 million the week before. Total motor gasoline inventories swelled by 10.6 million barrels. (Event E on the chart.)

FOMC released minutes of its latest policy meeting, at which the Committee raised interest rates for the first time in nearly a decade. The notes looked somewhat dovish, mentioning languishing inflation and potentially slow pace of monetary tightening in the future as a result. (Event F on the chart.)

EUR/USD as of 2016-01-06

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