The information post FOMC minutes has been released and the US Federal Reserve announced that there were no real surprises. The market reaction has been subdued, especially after the recent US inflation print, which prompted a broad sell-off in the US Dollar.
According to the Fed, the key takeaways include the fact that the September staff projections remained unchanged. The Fed has reiterated its desire for data-based decision making. If information showed progress towards the inflation goal, further policy tightening would be appropriate.
However, Fed policymakers expressed concerns about the limited progress in bringing down core services, excluding housing inflation. They confirmed the need to see a more sustained push lower on the inflation front to be at ease.
The US dollar index has remained relatively unchanged following the data release, and EUR/USD has already begun its selloff thanks to the DXY recovery today. The EUR/USD is now below the 1.0900 level, and immediate resistance is around the 1.0950 area and today’s daily high. A break higher leading could lead EUR/USD towards the psychological 1.1000 handle.
The US economy has shown positive signs in terms of inflation and the labor market. Retail sales, however, could be affected by the resumption of student loan repayments at the end of September. The coming month data could prove to be tricky and may not represent the overall economic environment. Hence, chances of any rate hikes at the Fed’s December meeting and early 2024 look unlikely.
