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EUR/USD Drops on FOMC Minutes

October 9, 2013 by

EUR/USD dropped today on the announcement that Janet Yellen will be the next leader of the Federal Reserve. The dollar gained even though Yellen is considered to be dovish and is likely to keep monetary accommodation for longer time. The minutes of the last Fed meeting showed that policy makers were very close to tampering quantitative easing. It also boosted the US currency even as the current budget deadlock makes QE tampering unlikely this year.

US crude oil inventories increased by 6.8 million barrels last week and are above the upper range for this time of year. The increase was above the predicted 0.9 million and the previous week’s increase of 5.5 million. Total motor gasoline inventories increased by 0.1 million barrels and are at the top of the average range. (Event A on the chart.)

FOMC meeting minutes revealed that the policy makers were close to voting for reduction of monetary stimulus, but decided “that it would be appropriate for the Committee to await more evidence that progress would be sustained before adjusting the pace of asset purchases”. The minutes said:

For several members, the various considerations made the decision to maintain an unchanged pace of asset purchases at this meeting a relatively close call.

In fact, one member, Esther L. George, actually voted for slowing pace of asset purchases. (Event B on the chart.)

On Monday, a report on consumer credit was released, showing an increase by $13.6 billion in August, which exceeded the forecast $12.6 billion and the July rise of $10.4 billion. (Not shown on the chart.)

EUR/USD for 2013-10-09

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