FOMC Minutes Preview -by-Michael Oyebamiji

The last FOMC minutes made it clear that the Federal reserve is cautious at hiking rates due to global financial market volatility and downside risk from Emerging market most especially China. The FOMC minutes further highlighted that the committee remains data dependent.

To add to the dovishness, last week the Federal Reserve chairman further reinstated that rates might stay lowers and FED has enough ammunitions and she literally reduced the possibility of rate hikes to less than 4 which the market was expecting.

in the past couple of days, we have seen quite a lot of Federal reserve members voicing out their views either in favour of a rate hike or a cut. Also, most economic data released from the US economy has been mixed. The most disappointing data has been the trade deficits which increased to minus $47.06 billion. Other data such as services pmi and ISM Non-Manufacturing beat market expectation at 51.3 and 54.5 respectively.

USD has been the biggest loser of the FOMC policy and we have seen investments flowing back into the emerging markets in the past couple of weeks. Today’s meeting will be a very important one to decide the direction of USD. A dovish tone will send USD further than and Emerging Market currencies will rally.

Without any doubt, it will be a tough battle between the hawks and the doves in the FOMC committees in deciding which policy measures to follow regarding monetary tightening.