Yesterday's publication of the minutes of the July meeting of the Fed had a negative impact on the quotations of the US dollar, which fell significantly in tandem with the euro and the British pound.
This was due to the fact that the opinions of the leaders were divided on the further terms of the interest rate increase, which is directly related to the low level of inflation.
As noted in the protocols, questions about low inflation caused the division of opinions of the leaders of the Fed on raising interest rates in the future, including this year. Let me remind you that many economists forecast at least one more rate increase by the end of this year. The whole focus is on December this year, so a good inflation rate for the 3rd quarter will increase this probability.
The whole problem now is weak inflation. Many participants in the meeting noted that the recent slowdown in inflation is probably caused by special factors and the risk of its retention below 2% for quite a long time is now much higher than it was before.
Fed officials also discussed possible reasons why inflation remains weak with low unemployment and agreed that improving labor market conditions will lead to higher prices in the near future.
As for the experts of the Federal Reserve, in the minutes they stressed the US GDP in the second quarter of this year, which accelerated and became stronger. Experts also expect a weakening of the US dollar and lower long-term interest rates in the next few years, and the current low level of inflation is only a temporary factor.
Despite this, the forecast for inflation for 2017 was lowered due to weaker than expected economic data.
As for the timing of the start of a program to reduce the balance, unfortunately, for many market participants they were not named. The leaders considered it expedient to signal only about a rather early beginning of the reduction of the balance sheet, and without specifying specific dates.
As for the technical picture of the EUR/USD pair, the large growth at the end of the American session on Wednesday led to the return of the trading instrument in the range of weekly highs. The consolidation above the resistance level of 1.1790, which limits the further upward potential of the euro, will lead to a new round of growth with an output at the monthly highs of 1.1840 and 1.1880.
If the demand for the euro again begins to "choke" gradually in the resistance area of 1.1790, then the sellers will quickly return to the market, which will lead to the renewal of 1.1750, and consolidation below this level to return to the support area of 1.1720 and 1.1690.
The direction of movement on the US dollar can set data on the labor market.
