How Have Assets, Markets Reacted To FOMC Minutes?

The US dollar edged lower for most of Wednesday, but eventually received an unexpected boost from the US Federal Reserve’s Meeting Minutes.

Fed policymakers noted that “In light of elevated inflation pressures and the strengthening labor market, participants judged that the increase in policy accommodation provided by the ongoing pace of net asset purchases was no longer necessary.”

The minues document showed that most participants judged conditions for a rate hike could be met relatively soon if the recent pace of labor market improvements continues. Earlier in the day, the US published the ADP survey on private job creation, which printed at 807K much better than anticipated. Finally, policymakers began discussing reducing the balance sheet.

Wall Street was trading mixed, with the Nasdaq Composite sharply down but the DJIA soaring to record levels. The selloff in tech equities could be blamed on a certain risk-aversion, as investors are dropping high growth shares to the benefit of more valuable, cyclical stocks.

However, Fed’s announcement sent all of the major indexes into the red as US government bond yields jumped. The yield on the 10-year Treasury note reached the notable 1.70% threshold.

The EUR/USD pair peaked at 1.1346, shedding ground and now hovering at around 1.1310. GBP/USD flirted with 1.3600, also retreating but retaining most of its intraday gains. Commodity-linked currencies trimmed intraday gains post-Fed, ending the day with modest losses. Safe-haven currencies were up, with the USD/JPY pair holding above the 116.00 threshold.

Gold peaked at 1,829.59, from where it began retreating ahead of the Fed. It currently trades at around $1,814 a troy ounce. Crude oil prices have retained modest gains, with WTI trading at around $77.60 a barrel.