FOMC Minutes in Focus

The FOMC minutes later today are drawing plenty of attention amidst the growing talk of a “Fed pivot”. With Q2 GDP having come in negative, confirming a technical recession, and July CPI having moderated from 9.1% to 8.5%, the case for a slower pace of tightening from the Fed has grown. With this in mind, traders will be looking to the minutes release for any clues as to how the bank Is likely to act at the upcoming September meeting.

If the Fed is seen focusing on recession risks, this will no doubt give weight to the idea of a softer hike in September. Market pricing has shifted from a .75% hike to a .50% hike in recent weeks. Today’s minutes might see that move further entrenched. However, it’s worth remembering that these minutes have lost a little relevance in the way of recent data. Both the negative GDP and softer CPI numbers came in since that meeting meaning that the minutes themselves might seem a little at odds with recent developments.

Keep An Eye on US Retail Sales

With that in mind, today’s US retail sales data for July might end up being more market moving. The market is forecasting headline retail sales to drop to 0.1% from 1% prior and core retail sales to remain unchanged at -0.1%. However, in light of the negative GDP print there are downside risks here. If we see today’s data undershooting these forecasts, this will no doubt see rate pricing reducing further, likely weighing on USD near-term.

Where to Trade Today’s US Data?

GBPUSD

If USD does come off on the back of today’s data, GBPUSD looks to be a strong candidate for trading the move. On the back of today’s UK CPI print, BOE rate hike expectations have moved significantly higher. Price is currently carving out a potential inverse head & shoulders pattern, suggesting room for a move higher. Bulls can look to trade a break of the 1.2355 level targeting 1.2626 initially.