The Fed minutes contain mysteries, and the market is waiting with bated breath
2025-07-09 21:58:26
The Federal Reserve will release the minutes of its June monetary policy meeting at 2:00 am on July 10 (Beijing time). Although the meeting interest rate remains unchanged at 4.25%-4.5%, the latest Summary of Economic Projections (SEP) shows that two interest rate cuts are expected in 2025, each of 25 basis points, which is slightly loose. However, the expectation of a rate cut in 2026 has been lowered from 50 basis points in March to 25 basis points, reflecting that policymakers are still highly cautious about the long-term path.
From the meeting statement, it can be seen that the Fed still believes that the inflation level is "slightly high", while the job market remains strong and the unemployment rate is low. This judgment was subsequently confirmed by economic data. In June, non-farm employment increased by 147,000, significantly higher than the market expectation of 110,000, and the unemployment rate fell slightly from 4.2% in May to 4.1%. This further supports the judgment of maintaining the current interest rate unchanged in the short term.
Although some Fed officials are open to a rate cut in July, the mainstream market expectation still tends to be in September or even later. According to the CME FedWatch tool, the probability of a rate cut in July is almost zero, while the probability of keeping the interest rate unchanged in September is 36%. This reflects that even if there is an expectation of a rate cut, there is still great uncertainty about its specific timing, and traders are still waiting to see the Fed's path prospects.
Fed Chairman Powell said at a press conference that there is no rush to adjust policy and reiterated his emphasis on balancing data and policy. The market expects that the minutes will further reveal the details of the internal disagreements on the inflation path, economic growth and the timing of policy adjustments.
Analysts believe that if the minutes send a signal that the Fed is more inclined to take action before September, the US dollar index may face new selling pressure, especially in the context of the current downward trend in inflation, an early rate cut will be seen as a clear policy shift; on the contrary, if the minutes show that the Fed is more inclined to postpone rate cuts and remain highly vigilant about potential inflation risks, especially considering that future trade policies (such as a new round of tariffs) may push up imported inflation, the US dollar may receive further support.
Earlier this week, US President Trump signed an executive order announcing a new round of tariffs on some imported goods. Although the effective date has been postponed to August 1, his threatening tariff statements on Japan and South Korea on social media platforms have increased the uncertainty of the inflation path. This external risk factor may become part of the Fed's internal discussions, indirectly affecting the timing of policy adjustments.
From a technical perspective, the current RSI of the US dollar index is still below 50, and the momentum is slightly weak. Although the trend has gradually warmed up since the beginning of July, the 20-day simple moving average (SMA) has not yet been broken on the daily chart, indicating that the short-term rebound has not yet formed an effective trend reversal.
If the key resistance of 97.80 is broken, which is also the confluence of the 23.6% Fibonacci retracement, the 20-day SMA and the upper edge of the rising channel, the dollar is expected to test 98.50 (38.2% retracement) and the 99.00-99.10 range (50-day SMA and 50% retracement) as the next target. However, if the momentum is insufficient, the short-term downward trend may test support areas such as 96.80 (middle channel), 96.30 (previous trend low) and 95.80 (lower channel).
Judging from the current situation, the trend of the US dollar will find a breakthrough between fundamentals and technical aspects. If the Fed minutes are dovish, the US dollar may pull back; if they show a hawkish attitude, bulls are expected to take advantage of the upward trend. Therefore, the release of the minutes has become an important turning point for the direction of the US dollar in the short term, and traders are paying close attention to the details of the policy wording.
The release of the Fed's June minutes is not only an important calibration of the policy outlook for the market, but also a test of the response to the current economic background changes. While waiting for the direction to be confirmed, the US dollar faces a double test between the policy forward-looking stance and potential external variables. Analysts generally believe that before there is a clear breakthrough in the technical pattern, the detailed wording in the minutes, especially the "delayed adjustment" and the assessment of external risks, will dominate the short-term volatility of the US dollar.
From the meeting statement, it can be seen that the Fed still believes that the inflation level is "slightly high", while the job market remains strong and the unemployment rate is low. This judgment was subsequently confirmed by economic data. In June, non-farm employment increased by 147,000, significantly higher than the market expectation of 110,000, and the unemployment rate fell slightly from 4.2% in May to 4.1%. This further supports the judgment of maintaining the current interest rate unchanged in the short term.
Although some Fed officials are open to a rate cut in July, the mainstream market expectation still tends to be in September or even later. According to the CME FedWatch tool, the probability of a rate cut in July is almost zero, while the probability of keeping the interest rate unchanged in September is 36%. This reflects that even if there is an expectation of a rate cut, there is still great uncertainty about its specific timing, and traders are still waiting to see the Fed's path prospects.
Powell's attitude is cautious, and the content of the minutes becomes a key signal for the market
Fed Chairman Powell said at a press conference that there is no rush to adjust policy and reiterated his emphasis on balancing data and policy. The market expects that the minutes will further reveal the details of the internal disagreements on the inflation path, economic growth and the timing of policy adjustments.
Analysts believe that if the minutes send a signal that the Fed is more inclined to take action before September, the US dollar index may face new selling pressure, especially in the context of the current downward trend in inflation, an early rate cut will be seen as a clear policy shift; on the contrary, if the minutes show that the Fed is more inclined to postpone rate cuts and remain highly vigilant about potential inflation risks, especially considering that future trade policies (such as a new round of tariffs) may push up imported inflation, the US dollar may receive further support.
Earlier this week, US President Trump signed an executive order announcing a new round of tariffs on some imported goods. Although the effective date has been postponed to August 1, his threatening tariff statements on Japan and South Korea on social media platforms have increased the uncertainty of the inflation path. This external risk factor may become part of the Fed's internal discussions, indirectly affecting the timing of policy adjustments.
Analysts: The technical side is in a tug-of-war, and the short-term momentum of the US dollar is in doubt
From a technical perspective, the current RSI of the US dollar index is still below 50, and the momentum is slightly weak. Although the trend has gradually warmed up since the beginning of July, the 20-day simple moving average (SMA) has not yet been broken on the daily chart, indicating that the short-term rebound has not yet formed an effective trend reversal.
If the key resistance of 97.80 is broken, which is also the confluence of the 23.6% Fibonacci retracement, the 20-day SMA and the upper edge of the rising channel, the dollar is expected to test 98.50 (38.2% retracement) and the 99.00-99.10 range (50-day SMA and 50% retracement) as the next target. However, if the momentum is insufficient, the short-term downward trend may test support areas such as 96.80 (middle channel), 96.30 (previous trend low) and 95.80 (lower channel).
Judging from the current situation, the trend of the US dollar will find a breakthrough between fundamentals and technical aspects. If the Fed minutes are dovish, the US dollar may pull back; if they show a hawkish attitude, bulls are expected to take advantage of the upward trend. Therefore, the release of the minutes has become an important turning point for the direction of the US dollar in the short term, and traders are paying close attention to the details of the policy wording.
Conclusion: Risks and expectations coexist, and the trend of the US dollar remains undecided
The release of the Fed's June minutes is not only an important calibration of the policy outlook for the market, but also a test of the response to the current economic background changes. While waiting for the direction to be confirmed, the US dollar faces a double test between the policy forward-looking stance and potential external variables. Analysts generally believe that before there is a clear breakthrough in the technical pattern, the detailed wording in the minutes, especially the "delayed adjustment" and the assessment of external risks, will dominate the short-term volatility of the US dollar.
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