Forex Analysis & Reviews: The Fed's minutes: split opinions, QE-4 issue and risks of US-China conflict
time 10.10.2019 06:12 AM
time Rilevanza fino a, 11.10.2019 06:09 AM

The minutes of the Federal Reserve are relatively rare to provoke strong volatility among dollar pairs. As a rule, after a two-week period after the last meeting, the market is already aware of the general mood of the regulator, thanks to the speeches of many of them. Yesterday, the Fed minutes was no exception in this regard: its key points were not a revelation for traders, so the dollar reacted minimally to this release. In addition, market participants are waiting for other, more important and relevant events of a fundamental nature - first of all, we are talking about trade negotiations between the United States and China, as well as data on the growth of US inflation, which will be published today.

Nevertheless, it is not worth completely ignoring the "minutes". And although this document did not affect the dynamics of the dollar in the moment "here and now", its value should not be underestimated. For example, yesterday's release once again reminded the market that the Fed had a serious split of opinions, and this fact may affect further decisions of the US regulator.

This image is no longer relevant

Let me remind you that at the September meeting, the Federal Reserve lowered the interest rate by 25 basis points. Against this step were such members of the Fed as the head of the Federal Reserve Bank of Kansas, Esther George and the head of the Federal Reserve Bank of Boston, Eric Rosengren. They were against easing the monetary policy in July, so the last meeting only confirmed their position. Moreover, the dot plot of the Fed members' expectations (dot plot) suggests that George and Rosengren are not united in their opinion. So, seven officials of the Federal Reserve stated the appropriateness of further steps to mitigate monetary policy, while five of their colleagues spoke in favor of maintaining a wait-and-see attitude - at least until the end of the year. Another five Fed members did not rule out a 25-point rate increase.

As you can see, the opinions of the Committee members diverged significantly: each has its own arguments in favor of a particular decision. So, according to the doves, the Federal Reserve needs to play ahead of schedule - according to them, lowering the interest rate will help offset the negative consequences of a slowdown in the global economy. In addition, the trade conflict with China has a negative impact on the prospects for US economic development. Supporters of soft monetary policy also pointed to a weak inflation rate, the base indicator of which has not been able to reach the target two percent level for a long time. According to the hawks, the regulator in this case is ahead of the events, depriving itself of the corresponding leverage that will be needed in the future. They believe that the most severe economic upheaval (possibly) is yet to come, so the regulator needs to pause now or even increase the rate by 25 points.

Despite the existing split in the Fed camp, the market is almost certain that the regulator will resort to another round of rate reduction: the probability of this step is almost 90%. Many of them do not exclude a double decline in November and December. In my opinion, such a scenario will be implemented in the event of the failure of the US-China negotiations and a new round of trade war. It is necessary to note one more important thesis of the published minutes: members of the Federal Reserve agreed that they would make decisions on rates, focusing on economic data. It is worth recalling that in recent years, US releases have not pleased dollar bulls: the producer price index and the ISM production index came out in the red zone, slowing down and not significantly reaching forecast values. If today's data on inflation in the US will also disappoint, then the likelihood of at least one rate cut will increase to 100%.

Another important nuance. During his last speech, the head of the Fed unexpectedly announced that soon the US central bank will resume regular operations on the open market, increasing its balance sheet account. The market interpreted this step in its own way - according to a number of experts, the regulator, in fact, starts QE-4, although Powell emphasized separately that this is not about the resumption of the stimulating program. According to the minutes of the September meeting, members of the regulator discussed this issue. The head of the Fed said that a series of "spot money injections" to maintain an adequate level of reserves is different from a full-scale quantitative easing program, and markets should understand and accept this difference.

This image is no longer relevant

Thus, the essence of the published minutes is as follows: The Federal Reserve is ready to lower the interest rate further. Another question is when exactly this must be done: before or after possible economic shocks. Some advocate the use of preventive measures, while others urge not to spend leverage that may come in handy in the future.

All this suggests that the fate of the interest rate again depends on the outcome of trade negotiations between Washington and Beijing. If they fail, the rate will probably be reduced at the next meeting. Otherwise, the regulator may take a wait-and-see attitude until the beginning of next year, tracking the dynamics of key US macroeconomic indicators.

Irina Manzenko,
Esperto analista di InstaForex
© 2007-2022
Approfittati subito dei consigli degli analisti
Deposita i fondi sul conto di trading
Apri un conto di trading

Le recensioni analitiche di InstaForex ti renderanno pienamente consapevole delle tendenze del mercato! Essendo un cliente InstaForex, ti viene fornito un gran numero di servizi gratuiti per il trading efficiente.

  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
  • Ferrari from InstaForex
    Top up your account with at least $1,000
    join the contest and win Ferrari
    F8 Tributo
  • Chancy Deposit
    Deposit your account with $3,000 and win $1,000
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
  • 30% Bonus
    Receive a 30% bonus every time you top up your account

Recommended Stories

La Cina abbandona quasi del tutto la politica zero Covid

L'euro e altri asset rischiosi, inclusa la sterlina britannica, si stanno gradualmente riprendendo grazie alla notizia che la Cina ha finalmente abbandonato oggi il suo programma zero Covid, allentando

Jakub Novak 14:59 2022-12-07 UTC+2

La BCE parla solo di tassi di interesse e obbligazioni

Il discorso secondo cui i funzionari della Banca centrale europea stanno seriamente valutando come sbarazzarsi rapidamente del saldo di obbligazioni per un importo di 5 trilioni di euro, ieri

Jakub Novak 10:18 2022-12-07 UTC+2

L'euro si sta riprendendo

L'accelerazione dell'attività commerciale nel settore dei servizi USA da parte dell'ISM ha mandato al ribasso l'EUR/USD, tuttavia, già durante la sessione Forex europea l'euro ha iniziato a riprendersi. Hanno aiutato

Marek Petkovich 15:26 2022-12-06 UTC+2

Il petrolio deve scavare più a fondo

Il mercato dell'oro nero alla fine dell'anno si sta comportando in modo estremamente misterioso. A dicembre entra in vigore l'embargo dell'UE sul petrolio russo e i paesi del G7 introducono

Marek Petkovich 13:06 2022-12-06 UTC+2

Bitcoin e oro: i possibile scenari inaspettati per il prossimo anno!

Secondo i dati di Standard Chartered i mercati stanno sottovalutando diversi scenari inaspettati per il prossimo anno. L'elenco include bitcoin che scende a $ 5.000 e oro che sale

Irina Yanina 11:17 2022-12-06 UTC+2

L'OPEC+ lascia invariate le quote di produzione

Nell'ultima riunione dell'OPEC+, svoltasi domenica, si è deciso di non modificare le quote di produzione per i suoi membri. A novembre, il gruppo ha accettato di tagliare tali quote

Irina Yanina 10:31 2022-12-06 UTC+2

I mercati temevano che la Fed avrebbe continuato ad alzare i tassi in modo aggressivo. Ed è davvero così? (la crescita della domanda di attività rischiose porterà a un aumento limitato di AUDUSD e XAUUSD)

I mercati sono ricaduti nella depressione lunedì, preoccupati che un mercato del lavoro ancora forte e l'economia statunitense ancora buona possano spronare la Fed a continuare ad alzare i tassi

Pati Gani 09:45 2022-12-06 UTC+2

Le aspettative sui tassi della Fed sono in calo, la pressione sul dollaro è in aumento. Revisione di USD, EUR, GBP

La posizione ribassista sul dollaro statunitense è leggermente diminuita, la riduzione settimanale della posizione corta netta di 852 milioni, a -2,34 miliardi. Per la maggior parte delle valute i cambiamenti

Kuvat Raharjo 16:05 2022-12-05 UTC+2

Per l'argento si prospetta un futuro molto luminoso!

Dopo una cupa estate, il mercato dell'argento sembra stia recuperando terreno, visto che alla fine della settimana scorsa i prezzi hanno raggiunto il livello più alto da giugno. La scorsa

Irina Yanina 12:18 2022-12-05 UTC+2

Il presidente della Fed ha preannunciato il crollo del dollaro statunitense

L'euro e la sterlina britannica con molta probabilità continueranno a salire dopo che il presidente Jerome Powell ha lasciato intendere ieri che la Federal Reserve avrebbe rallentato l'aumento dei tassi

Jakub Novak 16:52 2022-12-02 UTC+2
In questo momento non potete parlare al telefono?
Ponete la vostra domanda nella chat.