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The FOMC minutes released yesterday retained a hawkish tone. Most participants at September’s meeting thought another rate increase would likely be appropriate before year-end. Several judged Fed policy to be either not restrictive or only mildly restrictive, while almost all saw inflation risks tilted to the upside. However, the minutes did not establish a timetable for the next hike.
The Fed was united on September’s hike but divided over its rationale. Some officials viewed tighter policy as insurance against energy and other supply shocks spreading through the economy; others believed stronger demand already justified a higher rate path. This distinction matters because it could determine whether policymakers wait for more data or push for another increase soon.
Markets still overwhelmingly expect an October hold. Futures were pricing approximately a 19% probability of a 0.25% hike at the 27–28 October meeting, little changed after the minutes. The FOMC minutes predate last week’s softer inflation and employment figures, so I would not interpret its hawkish language as confirmation that an October hike is imminent.
In the Forex market, the US Dollar is holding firm and looking bullish near its 18-month high. The Dollar Index rose about 0.3% yesterday and is near 102.00 this morning. The longer-term bullish picture remains intact, although the minutes have not materially increased expectations of an immediate Fed hike. USD/JPY is near 158.11, keeping Yen weakness and the possibility of Japanese official intervention in focus. Trend traders will still be short of the EUR/USD which has been trading below 1.1200 again but is lately showing signs of rising.
US stock indices have retreated from their record closes. The S&P 500 Index fell approximately 0.2% to 7,801.77 yesterday, ending a four-day winning streak, while the Nasdaq 100 Index also declined about 0.2%. The Dow Jones Industrial Average lost roughly 0.7% to 51,179.87. These declines do not by themselves invalidate the recent bullish breakouts, but renewed oil-price strength is making further gains harder to sustain.
WTI Crude Oil’s key support level at $87.68 remains intact. The rebound has extended, rather than producing a sustained breakdown beneath the support identified earlier this week. Renewed Middle East tensions have lifted oil prices, with Brent rising about 2% to above $102. This preserves the immediate bullish case for WTI, but a convincing move breaking out from the triangle pattern is needed before that can start to be confirmed.
Bitcoin and Ethereum are approaching important support levels. Bitcoin is near $82,000, while Ethereum has just touched $2,544. The consolidations I mentioned yesterday are now being tested much more seriously.
Gold is recovering modestly after reaching a 2-month low.