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It has been almost three weeks since the FOMC’s interest rate decision yet investors, as well as traders, are still confused as ever about the committee’s plan. It is for this particular reason that the upcoming meeting minutes will be watched very closely.

The minutes, which is scheduled to come out tomorrow at 7:00 pm GMT, will provide us with a detailed report of the FOMC’s most recent meeting. Within the report, we’ll see the economic as well as financial conditions that affected the committee’s decision with regard to interest rates.

For the upcoming FOMC meeting minutes, you should watch out for two main things. The first one is the bank’s view on the economy and the other is any rhetoric about additional stimulus measures.

The Economy: Was Q3 A Good Quarter?

For my first point, you have to ask yourself the following question: Based on the FOMC meeting minutes, does the bank think that the third quarter was a good one or a bad one?

This is important to answer because it will give us an idea on the bank’s sentiment towards the economy. If they have a pessimistic view on the country’s economy, then the likelihood of another round of easing would increase, and that any interest rate hike speculations would be further squashed (as if they were any to begin with).

One thing you should note ahead of the meeting is that some Federal Reserve officials were caught on the wires being all gloomy. They said that the rate of joblessness in the country would probably remain above 7% through 2014.

Additionally, they also made some changes to their growth forecast back in July. Instead of witnessing a growth of 3.5%, the economy will only probably expand by 2.7% in 2012. For 2013, growth is expected to only be 3.3% versus the 3.9% initially expected.

Monetary Policy: Will QE3 Come Sooner Or Later?

Ultimately, when you’re tuned in to the minutes, make sure to be very sensitive to clues regarding the most controversial question in the market: Will QE3 come sooner or later?

Although not many expected Fed officials to increase the bank’s asset purchases during its last interest rate decision, the consensus was that they would already hint that more stimulus measures are on the docket.

However, Big Ben and his buds passed up the chance to signal easier monetary policy. In fact, the head honcho even sounded optimistic about the economy, saying that it somewhat strengthened!

So with all the mixed signals that we got from the FOMC statement, market participants are giddier than ever for the minutes of the meeting to get some clarity on the central bank’s thoughts on the economy and monetary policy. And of course, you can bet your neighbor’s iPhone 4S that the minutes will cause volatility on the charts!

It seems like the Fed is playing the wait-and-see approach, still gauging the current economic conditions before deciding on what to do. In this humble old man’s opinion, the fate of the dollar will probably depend on how confident the Fed is on the economy.

The USDX, which measures the value of the dollar against a basket of other currencies, will probably rally back up to its most recent high at 80.00 if the central bank thinks that recovery is robust enough to weather changes in the global economy (i.e., possible recession in the euro zone or economic slowdown in China) without more stimulus.

On the other hand, if the minutes reveal that Fed officials are more inclined to providing the economy with more stimulus, the dollar will probably get sold off and we’ll see the USDX drop to its most recent low around 75.400.

Let’s see how things play out once the meeting minutes is actually released.

USDX Daily