The US dollar fell against the euro and the Japanese yen today as minutes of the latest Federal Reserve policy meeting were relatively dovish. The greenback retained gains against most other major currencies thanks to the strong private employment report.
While US policy makers have raised interest rates in December, they were worried about low inflation:
Consumer price inflation continued to run below the FOMC’s longer-run objective of 2 percent, restrained in part by declines in both energy prices and the prices of non-energy imported goods. Some survey-based measures of longer-run inflation expectations edged down, while market-based measures of inflation compensation were still low.
This resulted in the outlook for a slow pace of monetary tightening in the future as the minutes said that “members expected economic conditions would evolve in a manner that would warrant only gradual increases in the federal funds rate.”
Meanwhile, Automatic Data Processing reported that employment grew by 257,000 in December. This is compared to the median forecast of 193,000 and the previous month’s gains of 211,000. The positive data gave dollar bulls hope that Friday’s non-farm payrolls would also be solid.
EUR/USD was up from 1.0745 to 1.0780 as of 20:55 GMT today after reaching the low of 1.0711 intraday. USD/JPY declined from 119.00 to 118.50. Yet at the same time, GBP/USD fell from 1.4672 to 1.4623.
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