United States Dollar Index slumps in countdown to FOMC minutes

The US Dollar (USD) trades lower against its major currency peers on Wednesday ahead of the Federal Open Market Committee (FOMC) minutes of the July policy meeting, which will be published at 18:00 GMT.

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.2% lower at around 99.45, closer to its two-month low at 99.29 posted on Monday.

The impact of the FOMC minutes is expected to be limited on Federal Reserve (Fed) interest rate expectations as Chairman Kevin Warsh remained committed to its “no forward guidance” policy. In the meeting, the Fed decided to leave interest rates unchanged in the range of 3.50%-3.75% and cited upside inflation risks.

Market experts also believe that the FOMC minutes won’t be a key trigger for the US Dollar’s outlook.

Dollar steadies as FOMC minutes eyed but Fed seen short of a game changer

Analysts at ING say that, for today, attention is firmly on "tonight's release of the FOMC minutes for the July meeting." They recall that "the vote was 9-3 for unchanged rates and the event proved a dovish one for the short end of the US curve and the Dollar, while the long end sold off."

ING argues that "the suspicion is that the 12-member FOMC is less hawkish than the participants whose projections delivered forecasts of a 9:9 split for a hike in the June set of Dot Plots." As a result, while "there may be a few hawkish references in tonight's minutes that could nudge the Dollar and short-dated rates a little firmer," ING stresses that "we do not see the minutes as a game changer."

Regarding the US Dollar’s outlook, analysts judge that "another batch of CPI and jobs data, plus the end-of-month Jackson Hole symposium, will have a bigger say in whether the Fed hikes in September," adding that "our base case is that it does not, and the Dollar softens a little."

According to the CME FedWatch tool, there is a 67% chance that the Fed will hold interest rates steady in September.