Forex: US Dollar Looks for a Lifeline in FOMC Meeting Minutes
Washington (Feb 19) The US Dollar may find its strength renewed if minutes from February’s FOMC meeting underscore policymakers’ commitment to “tapering” QE.
The publication of minutes from February’s Bank of England monetary policy meeting headlines the economic calendar in European hours. The document will help to further illuminate MPC officials’ discussion about the evolution of the Bank’s strategy that led to its augmented forward-guidance framework unveiled in last week’s Quarterly Inflation Report.
From a practical perspective, that document has already reveled the new strategy being adopted by Mark Carney and company, limiting the Minutes’ market-moving potential. With that in mind, follow-through on any near-term volatility borne of subtle nuances in officials’ rhetoric may prove limited. January’s UK Jobless Claims data is likewise on tap, with a 20,000 decline expected.
Looking ahead, the day’s pivotal bit of event risk comes in the form of minutes from January’s FOMC meeting. As we discussed in detail earlier in the week, the report may mark the beginning of a reversal for the US Dollar. The greenback has faced heavy selling pressure in recent weeks amid what appeared to be an unwinding of EM-driven risk aversion. The currency may find renewed vigor if a relatively hawkish tone from Fed officials reaffirms their commitment to the QE “tapering” process in spite of recently disappointing US economic news-flow.