July Fed Minutes Reveal Low for the Dollar

July Fed Minutes Reveal Low for the Dollar

This week the Dollar declined incredibly sharply after the Federal Open Markets Committee released the minutes from their most recent meeting. While it is regular for them to release minutes when they meet it is unusual for them to cause such a stir in the Forex market. Weak U.S inflation readings have led policymakers to become increasingly worried which is going to have a detrimental effect on the Dollar - at least in the short term.

While other Forex markets are picking up in the wake of all of the political turmoil of 2017 drawing to a close, the US Dollar fell to a session low against the Japanese Yen and the Swiss Franc. The index that tracks the greenback against six major currencies, the dollar index, also hit an all time session low this week which has led Forex investors with interests in the Dollar worried about the stability for the last quarter. The Euro has managed to remain robust in the wake of the news and unlike it’s American counterpart it actually rose against the greenback to a session high.

While the Trump administration started strong there have been many revelations over the past few weeks that have dented not only his ‘Make America Great Again’ campaign but also the economical landscape. The Dollar falling after this release only magnified a decline that started with the news two chief executives were to leave Donald Trump’s manufacturing council and strategic policy forum. Trump followed this news in typical ‘bull in a china shop’ fashion by announcing the disbanding of policy councils all together.

How has the recent Trump chaos made a difference to markets?

Everyone knew they were in for a bumpy ride when Trump was elected but no one expected inflation to be so low at this time of the year which is the single driving force behind the Federal Reserve expressing so much concern. Not only did US treasury yields fall in the wake of this but the benchmark lowered as well which will be a kick in the teeth for any investors who thought that things were just starting to level out.

Donald Trump appearing to fail to correctly condemn the recent violence in Charlottesville over the weekend has not only had a detrimental effect on people’s faith in him as a leader, but it has also made it look like it will now be a lot difficult for him to to deliver on the any pro-business promises he has made.

The Dollar is suffering in large part, perhaps, from the backlash of a Presidential candidate who thought his term would be a lot easier than it actually is. The more promises Trump made the more American markets seemed to stabilise but now we are well into his term and he has not delivered on them experts are running scared of investment opportunities that looked good a few months ago.

Needing to decrease the balance sheet, Federal policy makers had a plan that they were ready to roll out to diffuse the situation, but the weak inflation is still a worry enough for them to think about calling for a halt in interest rate increases until the period of uncertainty is over and they know this will be beneficial to the markets across the board rather than just in more stable periods.

The main issue of contention since the violence in Charlottesville seems to be that Americans are now calling into question Trumps readiness and ability to actually implement the tax and infrastructure reforms he has been promising since his successful Presidential campaign. It also has not helped the confidence of the public that he has not managed to move forward with things like the immigration changes without being blocked by the Supreme Court. It is more or less unheard of for lawmakers to find so much exception with a Presidential policy that they actually block it, and Trump not being able to get this done has started his term off with analysts being worried that he will also now not be able to make good on any of his economic promises either.