Fed In No Rush To Cut

The US Dollar is trading lower today on the back of yesterday’s FOMC minutes, despite the minutes taking a broadly hawkish tone. Policymakers agreed that significant progress had been made on inflation but were concerned over the risks of tightening too early. While members agreed that the tightening cycle had peaked, further data was needed before tightening could begin. In sum, the minutes reaffirmed the message that the Fed is in no rush to cut rates and will wait to ensure that inflation is moving sustainably back to its 2% target.

Rates Pricing Shifting

Pricing for a rate cut in May slumped on the back of the minutes, now sitting at around 40%. Pricing for a cut in June is around 60% currently and subject to revision should inflation remain sticky in coming readings. Despite the minutes, however, USD has softened which some have attributed to better PMI data out of the eurozone, with the UK due to report also.

US PMIs Due

Looking ahead today, the latest round of US PMI data will be on watch, alongside comments from Fed’s Jefferson and Cook who are both due to speak. Unless we see a firm upside surprise in today’s US data, USD looks likely to remain pressured for now while focus drifts elsewhere.

Technical Views

DXY

The index has broken down through the rising channel which framed the rally off YTD lows. Price is now testing the 103.48 level and with momentum studies bearish, risks of a downside break are seen. Below there, 101.22 is the next key support to note. 

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