After Janet Yellen’s dovish tones surprised at the last Fed policy decision, yesterday’s release of the Federal Reserve’s policy protocols from the March meeting might have given some hawkish bulls reason to believe that a summer rate hike was still on the table. However, the minutes reveal quite a lot of uncertainty among the members of the Federal Open Market Committee, with some members questioning the prudence of raising borrowing costs too soon, pointing out the consistent failure to meet the Fed’s target inflation rate which is far below the 2% threshold and a trend seen as likely to persist. Those FOMC members who believe that inflation is likely to persist are continuing to take a wait-and-see stance, even out to 2016, while the other, more hawkish members continue to push for a June rate hike.
As reported at 9:00 am (GMT) in London, the EUR/USD was trading at $1.0746, nearer the low end of a relatively tight daily trading band which ranged from $1.0732 to $1.0789. The GBP/USD was trading lower at 1.4786, a full 100 pips from the session high of 1.4886. The Pound Sterling is likely to be under some pressure until the release of the BoE minutes later today.
FOMC Path Still Unclear
Recently, the FOMC dropped specific language in their policy statements, specifically, the removal of the word “patience,” which led many traders to believe that the Fed was hinting at a imminent policy change, but analysts believe that the Fed will now let economic data drive the decision. And given the recent softness of data suggesting at an economic slowdown in the first quarter, and especially given the disappointing jobs figures in the NFP results last week, the uncertainty level has risen. The Federal Reserve has a dual mandate to protect prices and maintain full employment, and those dismal jobs figures are a definite blow to their mandate.