Dollar Mixed After FOMC Policy Minutes

The US dollar was mixed following today’s release of policy minutes by the Federal Open Market Committee. The currency fell against some rivals, while gained on others (primarily the riskier ones linked to the commodity market).

Markets considered the minutes of the March policy meeting, during which the Federal Reserve raised interest rates, to be largely hawkish. With that said, Fed members discussed ramifications of potential trade wars:

A number of participants reported concern among their business contacts about the possible ramifications of the recent imposition of tariffs on imported steel and aluminum. Participants did not see the steel and aluminum tariffs, by themselves, as likely to have a significant effect on the national economic outlook, but a strong majority of participants viewed the prospect of retaliatory trade actions by other countries, as well as other issues and uncertainties associated with trade policies, as downside risks for the U.S. economy. Contacts in the agricultural sector reported feeling particularly vulnerable to retaliation.

But what was especially important to markets was the fact that a number of FOMC members talked about faster pace of monetary tightening:

A number of participants indicated that the stronger outlook for economic activity, along with their increased confidence that inflation would return to 2 percent over the medium term, implied that the appropriate path for the federal funds rate over the next few years would likely be slightly steeper than they had previously expected.

Released earlier, the Consumer Price Index showed a drop by 0.1% in March, month-over-month, while forecasters had predicted the index to stay unchanged. The core CPI was noticeably better, though, rising 0.2%, the same as in February and matching expectations.

EUR/USD traded at 1.2367 as of 21:15 GMT today after opening at 1.2355 and rising to the daily high of 1.2396. USD/JPY declined from 107.19 to 106.82. GBP/USD was basically flat at 1.4177.

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