U.S. Session Forex Recap – August 18, 2016

  • FOMC minutes: A couple of policymakers wanted to hike in July
  • FOMC minutes: Weak business investment and housing sector present risks
  • FOMC minutes: Would be prudent to accumulate more data
  • Fed official Bullard preferred to see higher GDP before tightening
  • Bullard projected only one rate hike over the next two years
  • U.S. crude oil inventories down 2.5 million barrels

The tone of the FOMC minutes forced the U.S. dollar to return some of its recent gains since most policymakers didn’t seem so eager to hike rates just yet.

Major Events:

FOMC July meeting minutes After Fed officials Dudley and Lockhart got a lot of hopes up for an interest rate hike or two before the end of the year, the FOMC meeting minutes threw cold water on these expectations as some policymakers were still concerned about risks from bleak inflation, weak business investment, and a slow housing sector.

With that, the committee members agreed that it would be prudent to gather more data before making any policy adjustments. On a more upbeat note, policymakers acknowledged that near-term risks to the economic outlook have diminished and that the labor market has strengthened.

Bullard’s speech – Before forex junkies were able to get their hands on the Fed’s meeting transcript, FOMC member James Bullard was already busy sharing his thoughts on U.S. economic performance and potential policy decisions.

Although he pointed out that he sees no risk of the U.S. economy falling into recession, he did note that he preferred to see a much higher GDP before tightening. He added that risks may be to the upside but that he only sees one rate hike over the next couple of years.

Crude oil updates – The latest crude oil inventory report from the U.S. Energy Information Administration indicated a draw of 2.5 million barrels instead of the estimated increase of 0.3 million barrels.

This was enough to calm oversupply fears, which stemmed from Saudi Arabia’s recent hints on raising production to record levels of 10.8 to 10.9 million barrels per day. WTI crude oil recovered from a low of $45.80/barrel to $46.87/barrel while Brent crude oil was up from $49/barrel to $49.81/barrel.

Major Currency Movers:

USD – The U.S. dollar retreated across the board when the FOMC minutes didn’t show such a strong case for a rate hike.

EUR/USD popped up from a low of 1.1240 to a high of 1.1315, GBP/USD bounced off 1.2975 to a high of 1.3085, USD/JPY popped up to 100.63 but slumped back to 100.02, and USD/CHF found resistance at the .9650 area to test .9600.

Watch Out For:

See also:

Asian Session Recap

London Session Recap

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