Today’s Market Outlook
Focus on the FOMC Minutes as Markets Search for Direction in the U.S. Dollar
■ Market Summary
The U.S. dollar is weaker and the yen is firmer in today’s FX market.
The Dollar Index peaked near 99.692 during the Tokyo morning session before falling to around 99.396 in early London trading.
It is currently trading near 99.45 and has remained below its 10-day moving average of 99.750 for three consecutive trading days.
The key event today is the release of the U.S. FOMC minutes at 3:00 a.m. Japan time on 20 August.
■ September FOMC Pricing
Recent U.S. CPI and PPI data confirmed a slowdown in inflation.
As a result, the market now favors a policy hold at the September FOMC meeting.
Hold: 65.2%
0.25% rate hike: 34.8%
However, the probability of a rate hike remains close to one-third, meaning expectations for further tightening have not fully disappeared.
■ Key Points in the FOMC Minutes
The minutes cover the 28–29 July meeting, when the policy rate was left unchanged.
At that meeting, three of the twelve voting members supported a 0.25% rate hike.
The market will focus on the following points:
・How concerned the Fed is about higher oil prices
・Whether Middle East tensions are viewed as an inflation risk
・How much room the Fed sees for further rate hikes
・Whether slowing inflation has made the Fed more focused on holding rates steady
■ Scenario for a Stronger Dollar
If the minutes emphasize inflation risks or leave a strong possibility of additional rate hikes, expectations for a September hike could rise again.
Higher U.S. yields could support dollar buying, with the Dollar Index potentially rebounding toward its 10-day moving average near 99.750.
■ Scenario for a Weaker Dollar
If the minutes place greater weight on slowing CPI and PPI data and show caution toward further tightening, expectations for a policy hold are likely to strengthen further.
If dollar selling continues, the Dollar Index may test its 200-day moving average near 99.185.
■ Middle East Developments and Oil Prices
Tensions in the Middle East are rising again.
The UAE condemned Iran’s ballistic missile launch and announced its intention to cut economic ties with Iran.
NY crude futures remain elevated, holding above $85 and approaching the $86 level.
If oil prices remain high, renewed inflation concerns could provide support for the dollar.
However, if geopolitical risks escalate sharply, safe-haven buying of the yen may also intensify.
■ Key Events Today
・Eurozone July final HICP
・Eurozone June current-account balance
・South Africa July CPI
・South Africa June retail sales
・Comments from ECB President Lagarde
・U.S. weekly petroleum inventory data
・U.S. 20-year Treasury auction
・U.S. FOMC minutes at 3:00 a.m. Japan time on 20 August
■ Key Points for London and New York Trading
① How strong the views of rate-hike supporters are in the FOMC minutes
② Whether the 34.8% probability of a September hike rises or falls
③ Whether the Dollar Index can recover its 10-day moving average near 99.750
④ Whether the Dollar Index finds support near its 200-day moving average around 99.185
⑤ Whether oil prices break clearly above $86
⑥ Long-term yield movements after the U.S. 20-year Treasury auction
■ Summary
Dollar weakness and yen strength are currently dominant, but the FOMC minutes could shift the market back toward dollar buying.
A more hawkish stance toward additional rate hikes would favor dollar strength, while an emphasis on holding policy steady would likely lead to further dollar weakness.
Alongside the minutes, markets will monitor oil prices, Middle East developments, and U.S. long-term yields to assess the next direction for the dollar.
