The minutes from the FOMC meeting slightly increased the chances of rate hikes this year

The US stock market indices are successively descending to lower levels. For now, it's just a correction. Yesterday, declines accelerated after the FOMC minutes, which showed that most participants still see significant risk of inflation increase, which may require further monetary policy tightening. The market decided that it was bad news for stocks and good news for the dollar. The major currency pair broke above 1,09 and is below. US bond yields are rising, which indicates that a further increase in the cost of money in the United States is possible, although a September pause cannot be ruled out.

All doors open?

In fact, the message from the minutes of the last meeting FOMC changed only slightly compared to the previous one. What's more, Powell already during the July press conference tried to keep "all doors open"while emphasizing that each meeting is "live". At the same time, he did not want to commit that interest rate hikes would be possible only at every second meeting.

Ultimately, the next decision will depend on the data, so until September attention will be focused on consumer prices and labor market data. For this reason, it was clear from the outset that the minutes of the meeting would not be a good indicator. The statement that "most participants continued to see significant upside risks to inflation, which may require further monetary policy tightening" only underscores that the FOMC will continue to closely monitor the development of the CPI and PCE core (mostly) and react according to data if needed.

EUR/USD downward correction

July's labor market report signaled some cooling. If this trend continues in August, then The Fed may be pleased with the developments and may adjourn at the next meeting. If this is combined with a continuation of the decline in price growth, then the lack of hikes in September is likely. Of course, we cannot exclude surprises in the numbers that could bring even more uncertainty to the market.

EUR / USD exchange rate fell to its lowest level since July 6 this year. The quotations approached the horizontal technical support, which was set by lows from the beginning of the summer. All the time, the downward movement on the major currency pair should be treated as a downward correction in the medium-term uptrend. The current lows are moving in a regular channel that resembles a flag pattern. A negative signal that may indicate that the move to the south may be extended was the breaking of the uptrend line. The nearest barrier is the level of 1,0840.

Source: Łukasz Zembik, OANDA TMS Brokers