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FOMC minutes on deck

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FOMC minutes on deck

The Federal Reserve on Wednesday will release the minutes of its April 29-30 policy meetings, where officials voted unanimously to further reduce the pace of monetary easing. The minutes will be closely followed by the markets, which will look to glean from the discussion any sign of future policy.

The Fed announced last month it would trim bond purchasing by another $10 billion, a sign the central bank would continue to roll back record stimulus in measured steps leading to its full elimination in the fall. The Fed reduced its holdings of mortgage-backed securities from $25 billion per month to $20 billion, and reduced its holdings of Treasury securities from $30 billion per month to $25 billion.

The benchmark interest rate was left at 0.25 percent.

The US dollar was drifting higher ahead of the minutes. The US dollar index, a gauge of the greenback’s performance versus six major peers, rose 0.06 percent to 80.04. The index dipped to an intraday low of 79.89 on Monday.

The central bank’s decision to trim asset purchasing in April did not translate into measurable gains for the dollar, as the expected move failed to generate further insight about when the Fed could raise the interest rate. Disappointing economic data in the interim has reinforced the view the Fed may be prepared to leave the overnight rate at record low for an extended period as the US economy recovers.

The US dollar outperformed its northern rival, the loonie, after Canadian wholesale sales unexpectedly declined in March. The USDCAD climbed to 1.0905, advancing 0.3 percent.

The greenback lost ground against the British pound, which reacted to stronger than forecast consumer inflation data. The GBPUSD climbed to 1.6842, advancing 0.16 percent.

The Bank of England is scheduled to release the minutes of its latest policy meeting on Wednesday. The minutes are expected to show a unanimous vote in favour of keeping the interest rate and asset purchase facility unchanged.

The EURUSD declined 0.15 percent to 1.3689 amid disappointing German producer inflation data. German producer prices declined 0.1 percent in April. Year-on-year, producer prices were down 0.9 percent.

The dollar continued its long descent versus the Japanese yen. The USDJPY pair declined to 101.2450, a loss of 0.23 percent. The pair has declined half a percent since last Thursday.

The impact of central bank meeting minutes was on display today when the Reserve Bank of Australia released the play-by-play of its May 6 meetings. RBA officials said they expect economic growth to be subdued in the following quarters, a sign the central bank is prepared to keep interest rates at record lows for an extended period. This resulted in an immediate sell-off of the Australian dollar, which shed more than 0.9 percent to fall to two-week lows against its US counterpart.

The AUDUSD was trading at 0.9244 after opening the day at 0.9329.

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