The euro and pound fell in response to the rather pragmatic minutes of the Federal Reserve's meeting, which took place on October 31 - November 1 this year. Federal Reserve officials at their last meeting expressed little desire to cut interest rates any time soon, in part because inflation remains well above their target, according to the minutes. The policy decisions of the meeting showed that members of the Federal Open Market Committee were still concerned about stubborn inflation and the risk of its acceleration. "Participants agreed that monetary policy should remain restrictive until inflation is clearly moving down sustainably toward the Fed's 2 percent target," the minutes read. "Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the Committee's inflation objective was insufficient," the Fed policymakers noted.
At the same time, many meeting participants believed that it was necessary to proceed with caution and make decisions regarding all incoming information and its consequences for the economy.
Let me remind you that at the moment, traders in the futures market practically do not take into account the likelihood that policymakers will raise interest rates again in the ongoing cycle. Market participants predict that the central will venture into the first rate cut in May next year. However, nothing in the minutes indicated that members discussed the possibility of rate cuts at all, a point highlighted during Chairman Jerome Powell's post-meeting press conference. "The fact is that the committee is not thinking about cutting rates at all right now," Powell said at the time.
Let me remind you that the key Fed funds rate, which determines the cost of short-term borrowing, is currently in the range of 5.25%-5.5%, which is the highest level in 22 years.
Officials also concluded that the rise in bond yields was driven by rising "term premiums," or the extra yield investors demanded from holding long-term securities. The minutes note that policymakers view premium increases as a result of growing supply as the government continues to aggressively finance its huge budget deficit.
Elsewhere, Fed officials said they expect economic growth to slow markedly in Q4 2023 compared with the 4.9% increase in gross domestic product in Q3. "Risks to broader economic growth are likely skewed to the downside, while risks to inflation are skewed to the upside," the minutes noted.
Regarding today's technical picture for EUR/USD, buyers need to stay above 1.0890 to maintain control, which will enable a jump to 1.0925 and 1.0970. Already from this level, the price can climb to 1.1005, but doing this without support from large players will be quite problematic. The highest target will be a high of 1.1400. If the trading instrument declines, I expect any serious actions from large buyers only in the area of 1.0890. If there is no one there, it would be a good idea to wait for the low at 1.0860 to update, or open long positions from 1.0830. Speaking of the intraday outlook for GBPUSD, the British pound still enjoys demand. It will be possible to count on further strengthening of GBP/USD only after the bulld take control over 1.2550. Consolidation in this range will return hope for a recovery to the area of 1.2580, after which we can talk about a sharper surge of the pound to 1.2630. If GBP/USD falls, the bears will try to take control of 1.2500. If this can be done, a breakout of the area will strike the positions of the bulls and push GBP/USD to the low of 1.2455 with the prospect of reaching 1.2410
