On Wednesday May 24, the US Federal Reserve (FED) will publish the latest minutes of the Federal Open Market Committee (FOMC) monetary policy meeting at 18:00 GMT, sought by traders as they would provide information on the future trajectory of the US central bank.
On May 2-3, the US Federal Reserve (Fed) decided to hike rates by 25 basis points, the tenth hike in Federal Fund Rates (FFR) since the Fed began its tightening cycle in March 2022. However, it was perceived as a moderate rise, as Fed Chairman Jerome Powell and company opened the door for a pause. Since then, Fed officials have been divided on a pause or another hike, as there is uncertainty about how much tightening is necessary.
It must be said that after the May meeting, different positions have emerged around Fed officials. On the moderate side, some officials stressed that monetary policy is delayed and that a pause could give clues about the progress of the economy. in the midst of an aggressive tightening cycle. On the other hand, there has been talk of the need for further tightening and that it is too early to declare victory over inflation, despite data showing signs of a slowdown in the economy.
How could it affect EUR/USD?
Given that the EUR/USD is trading bearish on the week, a resumption of a hawkish stance by the Fed could keep the EUR/USD skewed to the downside. Therefore, the EUR/USD pair could reach a new weekly low during the day, below 1.0748.
However, the decline could be cushioned despite the fact that the latest data from the Eurozone (EU) showed a deterioration in Germany, as shown by the May figures from the S&P Global PMIs, along with a weak IFO business climate survey. , being below market expectations. However, divergence among central banks, with the European Central Bank (ECB) expected to hike rates twice in the foreseeable future, while the Fed appears to have peaked, could keep EUR/USD afloat sooner to test lower price levels, such as the 200-day EMA at 1.0683. On the other hand, if the minutes are in favor of dovishness, the EUR/USD pair could recover to 1.0800 and trim some of its weekly losses.
About the Minutes of the Federal Reserve Open Market Committee (FOMC)
FOMC is an acronym for the Federal Open Market Committee which holds 8 meetings a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses risks to its long-term objectives of price stability and sustainable economic growth. . The FOMC Minutes are published by the Board of Governors of the Federal Reserve and are a clear guide to future interest rate policy in the United States.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
