FOMC meeting minutes

KEY POINTS:

• FOMC meeting minutes to have an influence on the U.S markets today
• Investors will await to hear more on fiscal support
• Market reaction to the meeting minutes

Fed meeting minutes expected to influence the U.S markets today

The U.S markets could have very busy and difficult day ahead of the FOMC meeting minutes that is set to have an influence into the markets. The U.S Dollar will be in focus, as investors may be forced to wait for the headlines on whether or not monetary stimulus may remain accommodative in the year ahead.

The minutes for the meeting have the opportunity to remind the investors that tapering bond purchases could be an irrational decision considering the current economic condition in the U.S. the retail sales data may raise doubts about the decision to step away from bond tapering.

During the January Fed conference, the Fed chair dismissed rumors that the central bank could soon start tapering its monthly bond purchases, remaining optimistic about keeping the interest rate unchanged for as long as it has achieved its goal of inflation and employment mandate. The Fed also provided its support for additional stimulus due to the uncertainty around the coronavirus impact on the U.S economy and labor market.

The investors expect the Fed to give more details around the vaccination scheme and the liquidity provided to help support the economy until the pandemic period. In the U.S, the coronavirus infection trend is showing a decline in the number of cases and hospitalization, although nothing is yet exciting because of the current lockdown restrictions and much awaited stimulus relief from the government which the deal has not yet been approved, with unemployment figures declining to 6.3% in January.

Market reaction to the FOMC meeting minutes

Looking at the U.S markets both the stocks and the Dollar, the trading movement has recently been fueled by the vaccine rollout, the decline in the number of infections, and hopes of U.S stimulus relief of $1.9 trillion.

Following a recent solid decline in the GBPUSD due to the strength in the U.S Dollar, the major currency managed to regain its losses against the Pounds and bounced back below 1.3900 level.

As the market wait for the meeting minutes, the U.S Dollar will be on the spot light and should the central bank use a surprisingly dovish writing style that could help support a further strength to the Dollar. This could see the GBP/USD to fall even more to target a key level at 1.3760.

The U.S stocks market will await to hear more support from Fed around the stimulus relief and Fed keeping its promise of unchanged interest rates, this could see the stock markets regain its strength after a recent sell off.

 LULAMA MSUNGWA

Research & Markets Analyst

Scope Markets