Tuesday’s Fed Minutes.

The Fed Minutes has produced a much more hawkish and upbeat tone than before, starting an aggressive broad based rally in the US Dollar. The currency reaction was more severe, while equities did not see the same intense liquidation.  The markets reacted in such a USD positive way to the Minutes.

What is interesting now is how exactly markets will respond to favorable US economic data going forward. Up to this point, there has been good reason to view positive US economic data as positive global risk and therefore bearish on the US Dollar. However, given the perceived shift in Fed thinking that has become more apparent post Minutes, better than expected US economic data could very well result in additional US Dollar bids. A combination of solid data and expectation of an early reversal of Fed monetary policy could open the door for a more substantial resurgence in broad based US Dollar demand.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s