The US dollar gave up some of its earlier gains on Wednesday to decline against other major currencies following the release of the Federal Open Market Committeeâs latest meeting minutes. The greenback, which had suffered against the euro in recent sessions amid political risks in the United States, returned to fall against the shared currency despite initial gains today due to the dovish outlook offered by the minutes.
The Federal Reserve released the minutes of its latest policy meeting at 18:00 GMT today. The minutes revealed that the central bankâs policy makers felt that it would be appropriate to tighten the US monetary policy soon, with no hint of an interest rate hike next month. The Federal Open Market Committee is scheduled to meet on June 13 and may choose to raise interest rates 0.25% to a range between 1% and 1.25%.
Traders expected the minutes to show that the Federal Reserve plans to maintain its pace of tightening the US monetary policy unchanged. Instead, the minutes showed that the Federal Reserve officials were concerned about consumer spending and inflation, which led preferring a gradual monetary policy tightening without pointing to a rate increase next month.
The CME Group FedWatch tool, which tracks prices of federal fund futures to calculate the probability of changes in interest rates, showed an 83.1% chance of an interest rate hike next month ahead of todayâs release.
The Federal Reserveâs policy makers also favored starting the reduction of the central bankâs balance sheet during the current year, which may affect the pace at which they decide new interest rate hikes. The overall tone of the minutes was dovish, highlighting concerns within the Federal Reserve about the transitory period the US economy appears to be going through, which had negative effects on recent data releases.
EUR/USD traded at 1.1202 as of 18:50 GMT on Wednesday from 1.1169 at 15:50 GMT, the pairâs lowest level since May 22. EUR/USD began trading today at 1.1183.
The Dollar Index, which tracks the strength of the US currency against a basket of its major peers, was at 97.19 as of 18:46 GMT today from 97.35 yesterday.
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