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FOMC Minutes — Another Reason for Dollar to Rally

August 20, 2014 by

The Federal Open Market Committee released the minutes of its latest policy meeting today. They revealed that US policy makers are considering raising interest rates earlier than was previously planned. It is just another reason for the dollar to keep the rally, following yesterday’s housing data, and EUR/USD declined, reaching the lowest level in a year.

US crude oil inventories decreased by 4.5 million barrels last week, following the 1.4 million drop in the previous week, and are above the upper limit of the average range for this time of year. Markets have anticipated a decrease by 1.3 million. Total motor gasoline inventories increased by 0.6 million barrels and are in the middle of the average range. (Event A on the chart.)

FOMC released the minutes of its latest policy meeting today, which turned out to be rather hawkish. (Event B on the chart.) The minutes said:

Many participants noted that if convergence toward the Committee’s objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated. Indeed, some participants viewed the actual and expected progress toward the Committee’s goals as sufficient to call for a relatively prompt move toward reducing policy accommodation to avoid overshooting the Committee’s unemployment and inflation objectives over the medium term.

EUR/USD-2014-08-20

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