Daily Market Recap - Dollar rises on Fed minutes

The U.S. dollar rose very slightly against the euro Wednesday after the release of the expected minutes of the latest U.S. central bank (Fed) monetary meeting.

Fed policymakers said at their meeting last month that despite an improving U.S. economy, the Fed was still far from achieving its goals,

At the time of writing, the dollar index (DXY), has risen 0.13%, snapping a three-day losing streak, while the EURUSD which was trading higher earlier, fell roughly 0.10% to $1.1862 per euro.

In the minutes of its March 17 monetary meeting, the Fed reiterated that ultra-accommodative monetary policy would remain in place until the employment and inflation targets are met and would not be adjusted only in light of economic projections.

Most participants in the Monetary Committee felt that “the risks around the inflation outlook were balanced.” However, some pointed out that “supply disruptions and strong demand could push prices a little higher than anticipated,” according to the minutes.

Bond yields on U.S. 10-year debt were little changed upon release of the central bank minutes, remaining around 1.65%.

While the U.S. economy is recovering faster than the rest of the world, boosted by vaccines and huge stimulus packages, traders are wondering how long the Fed will be able to keep its ultra-accommodating monetary policy without the economy overheating and inflation taking hold.

A tightening of US monetary policy would make the dollar more attractive. The next Fed monetary meeting is scheduled for April 27-28.

While the euro has recovered against the dollar since the beginning of the month, the single European currency has still lost 2.7% since the beginning of the year.

(Chart Source: Tradingview 07.04.2021)

With the vaccination campaign in the European Union slowing, investors are less optimistic about the recovery.

Disclaimer: This material has been created for information purposes only. All views expressed in this document are my own and do not necessarily represent the opinions of any entity.