USD extends weakness post-Fed minutes, Trump-Xi meeting in focus

The US dollar, when gauged by a basket if six major currencies, remained under pressure in Asia, and is expected to run into a fresh selling-wave as the European trading gets underway shortly.

The European traders will hit their desks and react negatively to yesterday’s FOMC minutes, which turned out hawkish, but left markets unimpressed, in absence of key details on the Fed’s intent to trim its balance sheet size later this year.

Greg Gibbs, Director, Amplifying Global FX Capital, noted, “So most FOMC participates expect the asset run-off to begin later this year, after some further rise in the Fed fund’s rate.”

“The minutes did not say whether the beginning of the asset run-off might be accompanied by a pause in rate hikes, but some pause might be expected to assess the market impact of the asset run-off.”

Bloomberg carries a latest story reporting that traders aren’t buying into Fed projections and promises, as they believe the Fed won't make a move until 2020 or beyond. Moreover, "the Treasury and equity market response to the move was negligible. Are markets too complacent? Central bank asset purchases and broader largesse has been a key support factor for markets for nearly a decade – indeed, at times the support factor.,” Analysts at ANZ explained.

Later today, investors will continue to assess the FOMC minutes, as they gear up for the highly-anticipated 2-day meeting between the US and Chinese Presidents Trump and Xi, which commences later today.

Greg Gibbs added that the Trump/Xi meeting should help boost confidence. “The Trump meeting with Chinese President Xi comes into focus Thursday followed by the labor data on Friday.  One might expect the Trump/Xi meeting to provide calming sound-bites for the market, potentially supporting the US equity market.”

At the time of writing, the USD index is seen making minor-recovery attempts and hovers around 100.40 levels, having post daily lows at 100.28.