The week has been pretty light in term of economic data so far. Today is different as the minutes of the September FOMC meeting are due for release later today. Beside the fact that the minutes will probably revealed some details about the Fed balance sheet run-off, investors will meticulously scrutinized the minutes and adjust their expectations for December rate hike. For now, there is a 76.5% change of a 25bps increase on December 13, according to market pricing. Against such a backdrop, the Fed has little choice as postponing it would raise concerns among investors.
However, the rate hike story is not the only matter that investors will pay attention. Fed’s members discussions about the inflation outlook and more specifically about the last few months’ weakness in inflation pressures together with the potential impact on next year rate hike cycle will take high interest.
The US dollar eased slightly on Wednesday but it could be seen as a consolidation after the sharp reversal of the last few days. The USD should continue to trade sideways ahead of the minutes. Further weakness of the greenback has to considered, especially should the minutes suggest a more dovish stance from the monetary policy committee.