US dollar: This Wednesday Federal Reserve minutes are published

 

Fed minutes – 12/04 – despite the turmoil rippling through the US banking system in March the Federal Reserve went ahead and raised rates by 25bps, however, the tone in the statement came across as much more dovish with the removal of the reference to "ongoing increases will be appropriate", with "some additional policy firming may be appropriate".

Powell did go on to say that the prospect of rate cuts this year was not being considered, which some had touted might have been an option

This change helps to give the Fed wriggle room to pause at the next meeting, if the data permits, as well as indicating that the end of rate rises could be close. This week's minutes are also likely to be instructive as to how seriously the option of a pause on rates was discussed, and whether in going down that route may have sent a signal that the Fed was more concerned with the current situation than markets would have liked. Powell did admit that a rate pause was considered due to the banking crisis, however, the challenge for the Fed would always have been how to present this change without spooking the markets even more. Powell did go on to say that the prospect of rate cuts this year was not being considered, which some had touted might have been an option. A cursory analysis of the latest dot plot chart confirmed that Fed officials were not considering cutting rates, even as markets continued to price that very possibility. Expect the minutes to focus on the uncertainty around recent events while also outlining the data dependence component of any further moves on interest rates.

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