The July FOMC meeting minutes largely focus on the inflation outlook. Market participants observed the minutes on a mildly dovish note, retreat the dollar index down 0.70%.

The minutes revealed, “Many participants noted that much of the recent decline in inflation had probably reflected idiosyncratic factors”.

Regarding the Balance sheet normalization, the members “intended to begin implementing the balance sheet normalization program relatively soon”.

Regarding the Economic Outlook, “Members saw the near-term risks to the economic outlook as roughly balanced”. Since June meeting both staff and participant expectations remained unchanged.

On the back of the strong base metals and a sell-off in the USD investors migrate to the higher yield currencies like AUD and NZD on Wednesday session.

Also read: FX overview before and after the minutes 

Here are the analysts comment on July FOMC Minutes:

Nomura: We maintain our forecast that the next hike will take place in December meeting. However, we think the minutes marginally lowered the likelihood of a December rate hike.

Barclays: We continue to expect an announcement on balance sheet normalization at the September meeting and a third rate increase this year in December, but we have reduced our subjective probability about a rate increase later this year to about 50% (down from 60% previously).

Wells Fargo: After the Fed minutes were released, the dollar fell in a knee-up response to the US inflation outlook, which could fade because the money market has been cautious about the Fed’s interest rate path.

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