The foreign exchange markets are a mixed bag this Thursday morning, one day following the release of the minutes from last month’s Federal Reserve policy meeting. While the minutes were fairly unremarkable, they did have a slight bias towards “wait and see” on the prospect on when to raise interest rates, which is putting a little pressure on the surging dollar. Overnight, it was fairly quiet on the data front with mixed Eurozone PMI results pacing the market after HSBC Flash Manufacturing PMI for China came in line at 49.1. This morning, US weekly jobless claims and existing home sales data will be released before speeches by Fed members Fischer and Williams wrap up today’s session.
Following a three day rally, which edged the euro off two month highs, the dollar is taking a breather this morning following the release of the FOMC minutes. Janet Yellen and company did not make any bold statements and continue to weigh their options following a less than stellar first quarter, which produced growth of only 0.2%. While the prospects of a June hike are all but gone, there continues to be a glimmer of hope for action in September, but this is also unlikely. Sifting through some reports this morning has Wall Street moving back time tables as well, with not the first move in rates for the US since December 2008 not taking place until November at the very least. There was some discussion at last month’s meeting concerning the 2013 “taper tantrum”, which produced a rapid increase in bond yields, unsettling markets as the Fed weighed the issue of winding down QE purchases. Although the Fed ultimately ended the program in 2014 to little fanfare, it is a telling signal that policy makers are concerned an interest rate move could lead to market volatility and damage the growth they are helping takes hold this summer.
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