Gauging the size of the rift between FOMC members will be key for hike expectations and the US dollar
The three dissenters on the FOMC that wanted to hike in Sep are well known. The minutes aren't going to tell us anything new there. We've also heard from those dissenters and the reasons why they wanted to hike. What's less clear is how far the gap is between those who wanted to hold fire and those that wanted to hike.
It's this single question that has the ability to move the dollar. More often than not the minutes can be a dud on the price action front. That can dud can even be duddier when they follow an FOMC meeting that's had a press conference, as the market and press pretty much get well fed from that, and only the slimmest pickings remain in the minutes.
For the dollar to rally significantly on the minutes we need to see signs that the gap between the holders and the hikers is narrowing, and narrowing towards the hikers.
Time alone is causing the dollar strength as simple maths says that a hike must be coming in one of the last two meetings of the year, and December is the main one we're looking at. The FFR probability may be at 68.3% currently but the market is probably at something like a 95% chance of a hike by year end.
It the minutes indicate that the FOMC members were closer to a hike in Sep, 104.00 in USDJPY could be a small dot in the rearview mirror tomorrow.
If they are in any way dovish, or less hawkish than expected, a decent dip will have me looking for a long to run into the Nov, and then Dec meetings.
What will the minutes reveal?
