As the latest Fed meeting was accompanied by the central bank’s commitment to data dependence, flexibility, and patience, the upcoming FOMC meeting minutes may have a significant impact on the markets and the dollar in particular as the monetary authorities are expected to clarify the prospects of their monetary policy.
Should the regulator hint that the shift in the tone was not an abrupt turnaround from its earlier hawkish statements, and highlight that the path of future decisions will depend on the incoming data, it could be somehow positive for the greenback.
It will also be interesting to see how the Federal Reserve estimates the economic risks. In this context, a mention of the imminent danger of a recession is unlikely. But more downbeat rhetoric is possible. If the Fed says that it continues to see sustained growth as the most likely path for the economy, the buck could get a lift.
Towards the end of last week, the dollar upside momentum started to abate. And there is a high probability that traders will tend to fix profit further ahead of the release due to high uncertainty. In a wider picture, the U.S. currency remains relatively robust against the backdrop of weak European data.