US500 drops 1% ahead of FOMC minutes

US500 (S&P 500 fut) loses about 1% ahead of tonight's important event. At 7:00 pm BST the minutes of the July meeting will be published, where the Fed decided on another 75 basis point hike. Since then, the market has been geared towards the so-called "Fed pivot," a change of direction on the part of monetary policy in the US. Some market observers believe that the time has come for the Fed to reduce the pace of interest rate hikes, in view of the going slowdown and the setting of peak inflation.

On the other hand, there may have been excessive optimism on the part of market participants. Recent speeches by usually dovish Fed members Evans and Daly indicate that the recent reduction in inflation is not at all a sufficient sign of slowing inflation. At this point, the market is pricing in just over a 50% chance of a 75 basis point hike. If the minutes turn out to be hawkish, the probability could increase, with the indices retreating further from their recent local highs and the dollar having grounds to strengthen further. 

However, if the Minutes raise doubts among bankers about the economy no longer needing to cool, the indices will have further push to continue the recovery. 

The S&P 500 is losing 1% today, but is down more than 1.5% from yesterday's session peak. Key support for the index is the retracement of 50.0 of the entire retreat from this year and the 50-period average. Source: xStation5