A lot has changed since July 31
The FOMC Minutes capture a moment in time. In this case, it's July 30-31 and that was a time when markets were feeling better about the global economy.
The statement said "the labor market remains strong and that economic activity has been rising at a moderate rate."
That's still true but the Fed cuts rates because of brewing risks from abroad, chiefly China and Europe. Since then Trump has announced new tariffs on China and shattered a short-lived truce.
In all likelihood, the minutes will reflect optimism about the domestic economy and worries about global growth. If that's the message, then it could spark some dollar buying and risk aversion because the message is that the Fed isn't in any rush to cut. However it fails to account for what's changed in the past three weeks.
Time lag problems are a common problem in the FOMC minutes. The Fed ended up cutting at the end of July but the minutes of the previous meeting said that a patient approach is appropriate for some time. There was even talk of rate hikes.
In short, the minutes are a poor indicator of what's coming next. The market is apt to overreact to the headlines and then retrace the move.
Headlines
Another risk from the minutes is from the headlines. The market moves on the newswire reports and they sometimes have a habit of editorializing. From time to time that creates the wrong impression of what the minutes actually say. Again, this can create a whipsaw in the market as traders figure it out.
A big surprise for me would be if the minutes are dovish. If so, that might be dismissed by some as evidence of heavy editing. Still, it could be seen as a signal that the FOMC is perpared to cut rates in September and October, or even 50 bps in September. If so, I would be wary of fading any dollar weakness or strength in risk assets.
