Fed Minutes Show No Surprises, Leaving Dollar Without Direction

The Federal Reserve released the minutes of its April policy meeting yesterday. They showed no big surprises, providing no help for the US dollar. The greenback trimmed its gains versus the euro, was flat versus the Japanese yen and fell against the Great Britain pound.
The minutes revealed that the Fed members were considering ways to tighten monetary policy:

A staff presentation outlined several approaches to raising short-term interest rates when it becomes appropriate to do so, and to controlling the level of short-term interest rates once they are above the effective lower bound, during a period when the Federal Reserve will have a very large balance sheet.

Yet such discussions do not necessary mean that monetary tightening should be expected soon:

The Committee’s discussion of this topic was undertaken as part of prudent planning and did not imply that normalization would necessarily begin sometime soon.

It looks like the policy makers are satisfied with the current policy and are not going to change it without any major shifts in their outlook for the economy:

Members again judged that, if the economy continued to develop as anticipated, the Committee would likely reduce the pace of asset purchases in further measured steps at future meetings. However, members underscored that the pace of asset purchases was not on a preset course and would remain contingent on the Committee’s outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of purchases.

The US central bank differs in its stance from the Bank of Japan, which prefers to keep its policy unchanged for the time being, and the European Central Bank, which plans to actually make its policy even more accommodative. The Fed’s approach looks closer to that of the Bank of England, which also released its minutes yesterday, though the BoE minutes were much more helpful to the pound than the Fed’s minutes to the dollar.
EUR/USD traded at 1.3679 as of 00:28 GMT today after falling from 1.3701 to 1.3685 and reaching the daily low of 1.3634 (the lowest since February 13) yesterday. USD/JPY traded at 101.38, near the opening of 101.36. GBP/USD was at 1.6897 following yesterday’s rally from 1.6837 to 1.6898.

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