Daily Market Update

Ahead of Fed Minutes, Dollar Finds Footing

May 22, 2024

In a move that may surprise some this morning, the United States Dollar has finally found a bit of footing and is trading a touch stronger against most G10 currencies ahead of the FOMC’s minutes from its last meeting due to be released this afternoon.


The Bloomberg Dollar Spot Index has swung to positive territory on the week, gaining close to a quarter of a percent in the overnight session.

It appears that markets have finally begun to digest the Fed chatter this week, especially with regard to discussions of what a neutral rate might look like in the longer term rather than just a timeline for easing through the remainder of this year. Several speakers this week have mentioned that a ‘neutral rate’ – that is, an interest rate that would neither help nor hinder economic growth or inflation – may be higher than in recent years, potentially closer to the neutral rates of the 1990s or early 2000s. This is in contrast with the Fed’s G10 peers, who are still struggling to squeeze out GDP growth from their economies. While interest rate cuts from the Fed and, say, the ECB and the BoE this calendar year may be to the same or a similar extent, markets are starting to adjust to a longer-term outlook where the possibility of policy divergence becomes more of a reality and the Fed’s interest rate remains substantially higher than that of other major central banks for a prolonged period of time. The Fed’s minutes from its May 1 policy decision, due out this afternoon, could also contain some discussion that might lean more hawkish than Jerome Powell was in his press conference following the May 1 decision, and traders look to be preparing for such a possibility this morning.

Markets are also bracing for Q1 earnings from Nvidia due out after close this afternoon, and Bitcoin is once again trading at about $70,000. Traders are itching to break out of the ‘wait-and-see’ mindset that kept FX markets quiet through the front half of this week and today looks to be the catalyst to do so. Risk events around the world do pick up through the second half of this week, with Eurozone PMIs due out tomorrow morning, as well as Mexico’s GDP and CPI figures.

What to Watch Today…

  • S&P Global Composite PMI May Prelim, Thursday 9:45 AM
  • Michigan Consumer Sentiment, Friday 10 AM
  • Monex USA Online is always open.

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Swiss Franc has slipped more than a third of a percent against USD since yesterday’s close and is at its weakest point against the single currency Euro in more than a year as bets on interest rate cuts around the world continue to be pushed back. Switzerland’s central bank was the first major one to cut interest rates earlier this year, and as many other monetary policy governing bodies look at a slower easing cycle, CHF is becoming a victim of policy divergence-driven carry trades.


Pound Sterling is one of few currencies to trade stronger against USD this morning and is close to the top of the G10 board after UK CPI did not come down as much as expected. Expectations were for the YoY figure to show prices grew 2.1% last year, and the release came in showing 2.3% growth, shifting bets for BoE cuts down for this year and aligning overnight interest rate swaps closely with those we see for the Federal Reserve. This 2.3% price growth, though, still is quite a downshift from last month’s figure of 3.2% and is much closer to the Bank of England’s target rate of 2%, keeping GBP gains muted. Speculation over a potential snap election announcement in the UK is growing as well, throwing further uncertainty into the market.


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