A few hours from now, at 7pm London time, the Federal Reserve will release the minutes of the recent FOMC meeting, the contents of which will be keenly examined by the markets, which may then generate significant moves in USD and stock prices. It’s a simple action of a release of a statement (the minutes), and that is it.
So, what to watch out for? Well, it is already well established that the Committee sees balance sheet unwinding, i.e. the start of a real rollback of “quantitative easing”, as logically beginning next month. It is hard to believe there will be any change to that. If the minutes contain language which puts any doubt that this will happen next month, which is very unlikely, expect the Dollar to sell off heavily.
The major thing to watch for will be any language pertaining to the timing of the next rate rise, which is widely expected to happen in December. Although that is some way off, the language on inflation is seen as the key to determining the probability of the timing of the next rate hike, so any increase or decrease in previously expressed language over low inflation could shift expectations. The most likely surprise would be for the next hike to be delayed some way into 2018, beyond December at the end of this year. If we see language supporting that later today, it should give stocks a boost and the Dollar a hit, although it is quite possible the moves will not be very large or sustained.
If stocks get a boost and you want to jump on the long trade train, the Dow Jones 30 Index looks more attractive than the more broadly-based S&P 500 Index. If the Dollar takes a hit and you want a currency to be long of against it, things are less clear. Surprisingly, there are hints the Australian Dollar might be your best bet, as the Euro is sustaining some damage after holding up against the resurgent greenback well lately.