It was quiet overnight session but the US dollar remains offered following yesterday’s release of the minutes from the most recent Fed policy meeting. Voting members expressed caution on everything from wages to commodities and China and the greenback was sold as it now appears unlikely the Fed hikes rates at next month’s meeting. Economic data was sparse in both the Asian and European sessions as markets took their cue from the FOMC minutes released just before yesterday’s North American close. Sterling lost a bit of luster on worse than expected retail sales but otherwise remains tightly range bound between the euro and dollar. The euro gained further ground on the dollar one day after German politicians approved a 3rdGreek bailout program. A slew of manufacturing and services PMI results closes out the week for the Eurozone tomorrow morning.
There was no real Asian data to speak of as equities remain a mixed bag following Monday’s sharp 6% selloff in China. The last twenty four hours has been about the Fed’s minutes and the market’s reaction to those minutes. As previously stated, Ms. Yellen and company expressed new caution on the state of the global economy and its impact on America’s prospects for higher interest rates. The two most important takeaways concerned China and domestic inflation. Concerning China, the Fed noted “a material slowdown in Chinese economic activity could pose risks to the U.S. economic outlook,” which is something new for American policymakers. Chinese authorities’ actions to devalue their currency puts more pressure on the Fed as well, also noted in the minutes. Concerning inflation, the Fed “continued to see downside risks to inflation from the possibility of further… declines in commodity prices,” which also touched the greenback a little, notably against the euro and yen. The Fed also noted some concerns in the labor market, a new wrinkle for one sector of the economy that had been previously considered rock solid.
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