📆 FOMC minutes from September meeting will be released at 7:00 pm BST
- Fed delivered a rate hike in September and suggest that further rate hikes remain an option
- Dot-plot suggests that we should see one more 25 bp rate hike this year
- A number of FOMC members struck a dovish tone following the meeting, with such comments becoming more common at the beginning of October
- Fed members hinted that strong pick-up in yields can be seen as an additional rate hike as it leads to more restrictive financing conditions
- Markets has priced in Fed's hawkishness following the latest decision and now investors will look for any dovish remarks in minutes
- US500 trades over 1% higher week-to-date. How futures reacted during previous releases?
Is there a chance for less hawkish or even dovish minutes?
FOMC minutes releases scheduled for today (7:00 pm BST) is one of key market releases this week, with Thursday's CPI reading being the second top-tier US release this week. A higher-than-expected PPI reading today creates risk that CPI has also accelerated in September. When it comes to FOMC minutes, it should be noted that they will be related to the September meeting and therefore will not reflect upon strong data released over the past 2 weeks. What can we expect from today's release?
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Create account Try a demo Download mobile app Download mobile app- Some FOMC members said that interest rates are restrictive enough already. Should minutes highlight that a number or majority of central bankers expressed such a view, a dovish reaction on the markets may occur
- It is likely that many of FOMC members noted that US labor market is cooling
- A number of important issues - like auto workers strike, potential shutdown and Middle East escalation - were not discussed at the latest FOMC meeting
- Should word 'cautious' or 'patience' be included in the statement, document may be seen as dovish by the markets
- On the other hand, USD may catch a bid should minutes point to majority of central bankers seeing need for another rate hike
- It looks likely that the document will highlight need to keep rates at higher levels for longer but such a view is nothing new and mention of it should not have an impact on the markets
How will markets react?
S&P 500 (spot index and futures) saw a negative reaction following two previous releases of FOMC minutes. S&P 500 not only dropped in the first two hours following the release but also continued to drop the next day.
Source: Bloomberg Finance LP
US500 bounced over 4% off a recent local low and is closing in on the 50% retracement of the latest correction. The near-term target for bulls could be the aforementioned 50% retracement in the 4,430 pts area. On the other hand, should the market take today's minutes release as hawkish, US500 could experience negative reaction with 4,375 pts area being the first major support. It should be noted that the latest rebound on US500 has been driven by pullback in US yields.
Source: xStation5
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