Forex Signals – Dollar Flat Fed Disappoints
FxPremiere.com – The dollar was flat on Thursday morning in Asia over disappointing minutes from the U.S. Federal Reserve’s last policy meeting.
The U.S. Dollar Index that tracks the greenback against a basket of other currencies inched up 0.03% to 93.052 by 9:44 PM ET (2:44 AM GMT).
The minutes, released on Wednesday, gave investors few clues on whether the Fed will adopt a more dovish policy framework in the months ahead.
Although it had been widely expected that the policy would adopt an average inflation target and seek to push inflation above 2%, the minutes were vague regarding the issue. They stated that “a number” of Fed members suggested that would be helpful to make a revised statement on its policy strategy at some point, without any further details.
“Traders were hoping [the minutes] would cement a clear consensus in the Fed’s ranks for a series of key changes in the 18 September meeting,” Pepperstone head of research Chris Weston told Reuters.
“[But] there seems little consensus in the Fed collective to adopt an inflation-targeting regime, which is what so many have positioned for.”
The minutes also struck a gloomy note about the U.S. recovery from COVID-19, with Treasuries seeing a modest sell-off after the minutes revealed Fed skepticism over capping government bond yields to encourage recovery and investment.
Some investors warned that the dollar could stay on a down note for longer, with short bets against the greenback at their highest level since 2011 and long bets on the Euro also seeing a record high.
“All that was needed to push up the dollar was a catalyst; the minutes provided the catalyst,” Commonwealth Bank of Australia (OTC:CMWAY) currency analyst Joe Capurso.
“Nevertheless, we still expect the dollar to track lower. The rest of the world economy, led by China, is recovering…we consider the AUD’s fall overnight as a short-term pothole along a road that trends higher,” he added.
Investors will now see whether the Fed will unveil more details during the Jackson Hole symposium, due to take place from August 27-28, or at the next Fed meeting in September.
The USD/JPY pair was also flat, inching up 0.02% to 106.12.
The AUD/USD pair edged down 0.12% to 0.7172 and the NZD/USD pair inched down 0.03% to 0.6555.
The USD/CNY pair inched up 0.07% to 6.9243, with U.S.-China tensions continuing to mount after the U.S. on suspended its extradition treaty, as well as ending reciprocal tax treatment, with Hong Kong earlier in the day. The People’s Bank of China is also set to release its loan prime rate later in the day, which is widely expected to remain unchanged.
The GBP/USD pair inched up 0.01% to 1.3100.