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FX.co ★ 23.11.2022: Investors anticipate FOMC meeting minutes; outlook for USDX, USD/JPY, AUD/USD, NZD/USD

23.11.2022: Investors anticipate FOMC meeting minutes; outlook for USDX, USD/JPY, AUD/USD, NZD/USD

The Fed meeting minutes for November are on tap today. Perhaps they will contain some hints about the Fed’s next steps on monetary policy. However, the minutes include information that was relevant almost 2 months ago. Besides, the next Fed meeting will be held in just three weeks. It is scheduled for December 13-14.

Therefore, market movements will depend on the economic situation and fresh macro stats. Several Fed policymakers warned that the regulator may eventually have to raise rates higher than previously projected. So far, there have been more hawkish remarks than dovish ones.

Fed Chair Jerome Powell made it clear that the central bank might raise rates for a longer period of time. James Bullard, Neel Kashkari, and Loretta Mester expressed a similar point of view.

Kansas City Fed President Esther George does not rule out the possibility of a slowdown in aggressive tightening if needed. However, almost all policymakers are backing further tightening if it helps finally push inflation to the 2% target.

At the same time, they are somewhat convinced that the Fed will undertake a smaller rate hike by 50 basis points. US Treasury yields are declining amid such expectations. Dollar bulls are trying to maintain further growth. The US currency is now trying at 107.2. Its liquidity is likely to drop significantly in the second half of this week as trading floors will be closed on Thanksgiving Day.

The US dollar index is consolidating in the downward range of 106.8-107.2. However, it still has some drivers, namely the Fed’s strong commitment to monetary tightening. Other central banks are less hawkish when it comes to rate increases.

It appears that the yen lost momentum. In the Asian session, the dollar/yen pair advanced to 141.4 from the low of 140.9. Despite the moderate decline, the US dollar remains the strongest currency in the pair.

The upcoming rate hike by the Fed will be positive even if it is smaller than expected. The BoJ sticks to an ultra-loose stance, which means that the rate will remain near zero. Besides, the Japanese regulator has more than once said it has no intention to change its stance in the near future. Haruhiko Kuroda confirmed it last Friday.

He also stressed that it would not be appropriate to tighten monetary policy at this point given the current economic situation. In the Asian session, the dollar/yen pair was moving in a rather wide range of 140.8-141.5. It was mainly up in the morning. However, trading floors are closed in Japan on the occasion of Labor Day.

The Aussie is also volatile today as it is more sensitive to external rather than internal factors.

As for the state of the Australian economy, the PMI data for November published today does not indicate any improvement in the short term. Besides, analysts do not predict any positive shifts due to the epidemiological situation in China.

The Australian currency, which has a high correlation with Wall Street, managed to rise today to 0.6648. Despite the rollercoaster movements of the AUD/USD pair, it maintains a bullish bias, moving in the range of 0.6634-0.6673.

The Kiwi added gains thanks to the Reserve Bank of New Zealand. Today, the regulator raised the interest rate by 75 basis points.

It was the ninth rate increase in a row and the most aggressive tightening since 1999. Since October 2021, the central bank hiked the rate by a record 400 basis points. Now, inflation stands at 7.2%. The regulator is trying to push it to the range of 1-3%.

The NZD/USD pair is also more vulnerable to external events. For this reason, its first reaction to the rate decision was rather subsided. However, a bit later, the pair climbed to 0.6179, moving in the wide range of 0.6138-0.6199.

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*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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