Federal Reserve minutes fail to ease pressure on US Dollar, Euro rally continues

Matthew Ryan07/Apr/2016Currency Updates

The US Dollar continued its march downwards on Wednesday, despite comments in the Federal Reserve’s March meeting minutes that validated expectations that policymakers in the US remain on course to hike interest rates multiple times this year.

While several participants argued for caution, two officials voiced support for a rate hike in March, much earlier than anticipated by the markets. The FOMC voted 9-1 in favour of keeping rates unchanged last month.

Yesterday’s minutes continue to show that policymakers in the US remain divided over two major issues. Firstly, the path of core inflation, and its sustainability above the 2% target level, and, secondly, the effect of the global economic slowdown on economic growth.

Regardless, while we believe that the Fed is very unlikely to hike at its next meeting in April, it remains on track to increase rates at the subsequent meeting in June, with one additional hike at some point in the remaining six months of the year. This should ensure a gradual US Dollar strengthening against almost all of its major peers.

The pace and timing of Fed rate hikes remains the single biggest driver in the currency markets at present and businesses continue to seek risk mitigation strategies in anticipation.

Similarly, it remains to be seen whether the European Central Bank will ramp up its monetary easing measures further in a bid to jumpstart the still stagnant Euro-area economy.

ECB President Mario Draghi will be speaking at an event in Portugal today, with any comments on monetary policy likely to be a market mover. The Governing Council’s March meeting accounts this afternoon could also prove significant for the single currency.

Major currencies in detail:


Sterling took a backseat yesterday, ending little changed against the US Dollar following a lack of announcements or data releases in the UK economy.

The Pound continues to remain under pressure this week, with recent underwhelming performances in the flash PMIs on Monday and Tuesday continuing to show a UK economy in the process of slowing. This suggests we’re likely to see a more dovish showing from the Bank of England when it meets next week, with financial markets still completely discounting the possibility of an interest rate hike in the UK this year.

No more than second-tier economic releases in the UK economy today. Halifax house prices this morning are unlikely to be a major market mover.


The Euro continued its recent strong performance on Wednesday, appreciating by 0.35% against the US Dollar ahead of today’s ECB minutes.

Yesterday yielded little market moving economic announcements in the Eurozone. Industrial production in Germany declined by 0.5% in February, albeit beating expectations following the five-month high recorded a month previous.

Focus today turns to the ECB’s minutes, with a number of ECB policymakers also speaking throughout the day. Investors will be watching for further clarity around last month’s policy actions and any mention of recent Euro strength, given this was largely missing from both the statement and press conference in March.


The US Dollar fell again on Wednesday, despite being little moved after the Fed minutes, ending 0.3% lower.

In addition to yesterday’s minutes, Fed member and FOMC voter Loretta Mester spoke in the US. No new major information was released, with Mester claiming she expects rate hikes this year to be gradual.

Elsewhere, the historically volatile measure of mortgage applications provided a positive surprise, increasing by 2.7% following three weeks of declines.

Weekly jobless claims figures this afternoon could provide further clues regarding the health of the US labour market. Fed Chair Janet Yellen will also be speaking after London trading closes this evening.


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Written by Matthew Ryan

Strategy Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.