The Federal Open Market Committee (FOMC) will release the minutes of its November meeting Wednesday.
Ahead of this release, the greenback has remained resilient against its major rivals mid-week as the benchmark 10-year US Treasury bond yield holds above 1.6%. US Treasury rates fell after the November 3 bond decision while the dollar rose after the November Consumer Price Index (CPI) 6.2% shocker.
On Wednesday, the US Dollar Index which measures the value of the dollar against a basket of six world currencies was moving sideways around 96.50. On Tuesday, the 10-year US Treasury bond yield came within a touching distance of the critical 1.7% level before during the Asian trading session.
Investors now have their eyes on the PCE inflation report, which could have an impact on the June 2022 Fed rate hike. The FOMC Minutes is unlikely to offer any surprises regarding the inflation or the policy outlook. For one thing, the meeting took place before the October CPI report.
The FOMC forecast
When the Federal Reserve announced that it was reducing its $120 billion a month of bond purchases in November this year, Treasury yields dropped for the next five sessions.
It was only after the October CPI was released, with inflation at a 30-year record of 6.2%, that Treasury returns reversed.
It’s unlikely the FOMC will reduce bond purchases by the prescribed $15 billion a month into next year if fourth quarter growth is no more than the 2% of the third.
American consumers are the essential ingredient to GDP growth, particularly in the holiday bound fourth quarter. Retail Sales came in stronger than expected in October, providing the bond plan and Treasury yields with a solid speculative base for the taper.
How major pairs are faring ahead of FOMC
Wall Street’s main indexes closed modestly higher and US stock futures trade flat early Wednesday.
EUR/USD edged higher toward 1.1300 on the back of upbeat PMI data from the euro area and Germany on Tuesday but returned to the 1.1250 area early Wednesday. The pair is now dangerously close to the 2021-lows that it set earlier in the week.
Following a three-day decline, GBP/USD is in a consolidation phase of below 1.3400.
Gold suffered heavy losses and broke below the key $1,800 area on Tuesday. XAU/USD is currently posting small recovery gains above $1,790 but the near-term technical outlook seems to have turned bearish for the pair.
In the crypto space, Bitcoin continues to fluctuate below $60,000 as India’s cabinet is reportedly discussing plans to regulate cryptocurrency in the country. Ethereum is also moving up and down in a narrow band slightly above $4,000.
What’s more, the US dollar isn’t making life for cryptos any easier. For one thing, a strong US dollar puts pressure on Bitcoin and other digital assets. Since October this year, the market has witnessed nothing but the strength of the US dollar.
Should the US Dollar continue to strengthen, it’s going to be incredibly difficult for Bitcoin to gain any meaningful strength.
