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EUR/USD Rises, Ignores FOMC Minutes

May 20, 2020 by

EUR/USD rose today due to the market sentiment that was supportive of the euro. The session was light in terms of macroeconomic reports in the United States. With the absence of other important releases, the monetary policy meeting minutes of the Federal Open Market Committee could have been the major event today. But markets largely ignored them, not expecting any surprises after yesterday’s testimony of Fed Chairman Jerome Powell.

US crude oil inventories dropped by 5.0 million barrels last week, though they remained far above (about 10%) the five-year average for this time of year. The drop was a surprise to experts who were expecting an increase of 1.7 million barrels. The stockpiles fell by 0.7 million barrels the week before. Total motor gasoline inventories rose by 2.8 million barrels and were also about 10% above the five-year average. (Event A on the chart.)

FOMC released minutes of its April meeting, at which it decided to keep the target range for the federal funds rate unchanged at 0%-0.25%. (Event B on the chart.) The minutes suggested that interest rates will remain at low levels until the economy recovers from the pandemic:

Members noted that they expected to maintain this target range until they were confident that the economy had weathered recent events and was on track to achieve the Committee’s maximum employment and price stability goals.

Yesterday, a report on housing starts and building permits for April. Housing starts were at a seasonally adjusted annual rate of 0.89 million, down from the revised March rate of 1.28 million (1.22 million before the revision). Building permits were at a seasonally adjusted annual rate of 1.07 million, down from the revised rate of 1.36 million. Analysts were predicting a reading of 0.95 million for housing starts and 1.00 million for building permits. (Not shown on the chart.)

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