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Session recap: It is the inflation! or not; Fed leaves US dollar mostly unchanged

FXStreet (San Francisco) - Neither yes nor no, but the opposite. Apparently this is what the Fed said to the market on Wednesday after publishing the minutes of the last FOMC meeting. Overall a pessimistic stench in the report, but the feeling is that the Fed is saying they will not hike rates soon.

Earlier in the day, the foreign exchange market traded quietly with the US dollar awaiting the minutes. However, US stocks market appeared to be stressed since small-cap stocks and US high yield debt were declining sharply. Market was worried about a hawkish FOMC statement. But it didn't happen.

According to the statement, the Fed is worried about a sub-2% inflation 'for quite some time," and officials observed the need to monitor the falling inflation expectations since 'most participants anticipated that inflation was likely to edge lower in the near term, reflecting the decline in oil and other commodity prices and lower import prices.'

In this framework, majors reached intraday highs but the move was merely reflective and pairs returned to previous prices; with the exception of the USD/JPY that extended gains above 118.00.

The EUR/USD advanced for second day as the pair climbed to test the 1.260 level before returning to 1.2550 where the pair closed. The GBP/USD posted its first positive day in six sessions as the pair was fueled by the BOE Minutes.

The USD/JPY extended gains for a fifth day as the pair jumped to trade at fresh 7-year highs at 118.05. Then, it stepped back and closed at 117.95. Oil attempted to recover above the 75.00 level but it failed and returned to lows before closing at 74.45. US stocks market closed slightly negative on Wednesday but off lows after a rollercoaster day.

But the 'lesson today was to watch out for Swiss referendum polls,' as Adam Button commented in a recent report. "A quick fall in gold and a jump in EUR/CHF to 1.2026 followed one of the first real polls on the referendum. It showed little chance of it passing but there was additional confusion as news wires had differing headlines." The gold lost all previous session gains and closed at 1,183.

Key data

United States Building Permits (MoM) registered at 1.08M above expectations (1.04M) in October

United States Housing Starts (MoM) came in at 1.009M, below expectations (1.025M) in October

Americans buy record foreign bonds and stocks in September – BBH

Polls shows support slipping in Swiss gold referendum

Ahead the FOMC: Market fears the hawks; will the USD go up?

FOMC minutes show the Fed is worried about inflation; but no hike soon

Wall Street closed negative but far from lows after FOMC minutes

EUR/JPY oscillating in a drift back off highs

EUR/JPY is trading at 148.09, up 0.07% on the day, having posted a daily high at 148.15 and low at 147.97.
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