A choppy reaction to a mildly hawkish set of Fed minutes

  • Fed minutes show a mild hawkish lean: There was little to surprise markets. A marginal hawkish edge reaffirms market pricing for higher interest rates. 

  • USD marginally stronger in choppy moves: The initial USD strength on major forex has unwound overnight, but the positive bias remains.

  • Equities have been uncertain: Mixed moves on European indices with DAX slightly higher and FTSE 100 lower (dragged lower by ex-dividends). US futures initially fell but have recovered overnight.

  • Support for precious metals and oil: Commodities have found support overnight, although the gains on gold, silver and oil are limited.

Fed minutes confirm a growing hawkish bias on rates 

With a lack of market moving data, in recent sessions, there has been a focus on any clues in the minutes of the Federal Reserve meeting on 1st February.

The minutes showed a mild hawkish lean from the FOMC. This acts more as a confirmation than anything groundbreakingly new. 

The highlights of the FOMC minutes

Here are a few of the key takeaways from the minutes:

  • Whilst all members supported reducing the February hike to 25 basis points, a “few” could have supported 50bps. Furthermore, nobody was in favour of stopping the rate hikes.

  • The word “inflation” was mentioned on 91 occasions. There were no mentions of words such as “disinflation” or “transitory”. This suggests that elevated inflation is still a major concern.


Markets have already moved on since the FOMC meeting

The minutes may well be quickly forgotten. There has been much that has happened since the meeting on the 1st February. The Fed meeting does not provide much more than what we know now.

US economic data has been very strong in recent weeks. This includes inflation on both the CPI and PPI basis which has been more sticky than hoped. 

USD positive with risk appetite upbeat, for now 

US Treasury yields moved higher and USD strengthened initially off the back of the minutes. Although the USD gains eased off overnight, there are hints that there is still a positive bias for the USD in the European session.

More interesting though has been the reaction on equity markets. Indices fell away initially, with a negative close on Wall Street. However, US futures have recovered well overnight.

Indices have been on a corrective trend in recent sessions. This morning’s rebound is counter to the correction, so is an important test of how firm any recovery in risk appetite is. 

If the rebound is quickly sold into, it will be a sign of further corrective pressure. 


The pair has been sliding lower since early February. Another bearish candle into the close last night took the pair to a six-week low. 

  • An early bounce today is faltering in the resistance band 1.0610/1.0655 

  • The daily RSI remains below 40 around four-month lows. 

  • The 21-day moving average is in a decisive decline

This suggests selling into near-term strength. We continue to favour a retest of the 1.0480 January low.

Key resistance is 1.0705/1.0805 

S&P 500 futures

A test of the four-month recovery uptrend has held for now. However, the support looks tentative.

Breaking down below 4060 recently completed a small top that implies c. -125 ticks of correction.

There is now an area of overhead supply resistance between 4056/4078 that needs to be overcome to shift a corrective bias.

If the uptrend is broken the next test of support is at 3901.

Support and resistance levels for major markets


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