All the clamoring for the Fed to illuminate their plans for the balance sheet were finally satisfied in the minutes from the Fed’s meeting in May, so why are we seeing a weaker dollar? Two reasons. The first centers around the word transitory. The committee reiterated their belief that softer growth and inflation had been driven purely by transitory factors. Despite repeating this nine times throughout their brief, members saw fit to wait for evidence that confirms this weakness has abated. Second, the question on Trump’s push for fiscal spending. “Many participants continued to view the possibility of expansionary fiscal policy changes” as a potential driver to revise their forecasts higher, but likewise they see the prospects of this materializing “highly uncertain.”

One of the bigger reactions is the one in EURUSD, which makes sense given that investors are still net long on the euro, and they seem to really like that 1.12 handle.

 

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