What are FOMC Minutes, and why are they important?
The FOMC Minutes is a detailed report from the FED's previous FOMC meeting. The main areas that economists and traders watch are the voting results for initiatives that were brought up at the FOMC meeting, and the detailed economic review that is reported. A hawkish report may indicate future interest rate hikes taking place, and is viewed as bullish for the Dollar. While dovish voting, and a conservative view on the US economy is viewed as a Dollar negative.
After raising the Discount Rate two months ago, the FED has created expectancy for a continuation of tightening monetary policies. This action, along with worries in the EU and UK has led the Dollar Index to rally since the beginning of the year even as risk appetite, as measured by commodity and equity prices has risen. However, the FED has so far been unwilling to provide a date when they anticipate raising the FED rate. Also, Board Members have stated that the US economy continues to be fragile and risks of a double dip recession continue. Therefore, raising rates too early may hamper the US economy.
As such, Forex traders and analysts aren't expecting today's Minutes to shed much light on when the FED will raise rates, but the wording of the Economic Review will be much scrutinized. Specifically, eyes will be on the outlooks for the employment, manufacturing, and housing sectors. If the FED states that strength is beginning to emerge in these sectors, it could lead to additional strength taking place in the Dollar. However, if the Minutes reveal worry of continued fragility taking place in the US, it may lead traders to further their expectations of an Interest Rate taking place, thus potentially causing weakness in the Dollar.