The narrative coming out of the latest US Federal Reserve meeting minutes suggests that policymakers are sitting on the fence in regards to monetary policy. Fed members also voiced the need for flexibility which will likely be digested as a near-term negative for the Greenback.
Looking at the tone of the messaging used in the FOMC Minutes release, it certainly doesn’t look like US interest rates will be raised again in a hurry. However, policymakers also suggested that they would remain somewhat data dependent, so if US economic data picks up over the coming months the conversation might be reopened in the second half of 2019.
I would say however that the larger consensus that is probably going to build following this data release from the Fed is that we should expect US interest rates to remain on hold for a prolonged period. This explains why the Greenback has slipped lower late in Wednesday trade.
One of the more noteworthy stories that will make the rounds as we head into the closing periods of trading for the week will be resumed optimism over US-China trade optimism after Treasury Secretary Steven Mnuchin reportedly made comments that the currency part of the US-China trade deal is “complete”. This should help rebuild some risk appetite back into the investor environment, meaning we could see encouragement for global stocks, emerging markets and emerging market currencies as a result of Mnuchin’s remarks.
Investors do overall still want to hear President Trump announcing a “signing summit” with China before they can get excited with pricing in a complete trade deal. Nevertheless, the combination of Mnuchin’s most recent remarks and a non-committal Fed should help raise risk appetite after the latest IMF downgrade on world global growth.
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