Hawkish FOMC Mins

The Dollar is holding near recent highs on the back of the September FOMC minutes last night. As expected, the minutes came in on the hawkish side, shedding light of the shift in sentiment we saw at the meeting with 12 out of the 18 policymakers seen forecasting at least one further hike this year and four of them forecasting two. The minutes saw policymakers discussing elevated inflation levels as well as the scale of the advancements in the AI sector amidst the current investment boom we’re seeing. Against this backdrop, ‘most policymakers’ judged that another rate hike by year end would “likely be appropriate.”

Weak Jobs Capping Dollar

Despite these hawkish details the greenback was unable to breakout to fresh highs. This is no doubt due to the recent drop in the jobs market, evidenced last week, taking some of the potency out of the minutes. Friday’s NFP release saw the headline reading dropping sharply alongside a rise in the unemployment rate and a further softening in wage growth. Market pricing for an October hike was seen plunging to below 20% following the data having started the NFP week around 70%. Still, USD remains underpinned at current levels with a December hike still seen for now. If pricing for that month starts to drift lower, this could see USD surrendering recent gains.

Technical Views

DXY

The rally in the index has seen price breaking out above the bear trend line from summer highs and above the 101.91 level. While above here, the focus is on a continuation higher towards the 103.20 level next. The bullish outlook remains medium term while price holds above the 100-mark.