The publication of FOMC meeting minutes yesterday delivered an aggressive surprise, with participants showing serious concerns about persistent inflation and the prospect of rate cuts, which would lead to a sell-off in commodities and a strengthening US dollar.
➡️ The US Federal Reserve released the minutes of its latest policy meeting, which revealed two aggressive factors:
- Members are generally concerned that, despite apparent progress on inflation in recent months, it is proving stubbornly persistent.
- Members discussed that it may be necessary to keep rates at the currently relatively high levels for a longer period than expected.
However, it is worth noting that according to the CME FedWatch tool, there remains a consensus that the Fed will make its first rate cut at its next meeting in September.
➡️ Markets reacted quite strongly to the release of the FOMC minutes. The most dramatic drops occurred in metals, with the price of copper falling several percentage points in just a few hours, killing the long trading trend there. Precious metals gold and silver have suffered a sharp decline. The main stock indexes fared much better, as after small initial hits, the NASDAQ 100 index and S&P 500 index rose to new all-time highs, although the Dow Jones 30 index is decreasing. Trend traders and day traders they should be interested in obtaining long positions on the two main stock indices at historic highs.
➡️ In the Forex market , since Tokyo opened, the strongest major currency is the New Zealand dollar, while the Japanese yen is the weakest. The US dollar is doing little right now, but it rose yesterday and can be expected to get a tailwind from yesterday's FOMC meeting minutes.
➡️ Yesterday's publication of the data on the index of consumer prices of the United Kingdom was slightly higher than expected, with annualized inflation falling from 3.2% to 2.3%. A decline to 2.1% was expected. Core CPI also fell less than expected. This will reduce the chances of the Bank of England cutting rates at one of its next two policy meetings, which is a disappointment for Prime Minister Sunak who yesterday called a general election for 4 July. The opposition Labor Party is expected to win by a landslide and return to power for the first time in 14 years.
➡️ Flash Manufacturing and Services PMI data for the US, Germany, UK and France will be released today.
Credit by DailyForex.com