MUFG anticipates that the minutes from the September FOMC meeting will provide insights into the level of support for the 50bps rate cut and the current sentiment regarding inflation and the dual mandate.

Key Points:

Support for the Rate Cut:
- Market participants will be keen to understand how strong the support was for the 50bps cut, especially considering Governor Bowman’s dissent. Were there other members who shared similar concerns?
Balanced Risks:
- Vice Chair Jefferson recently indicated that the risks to the Fed’s dual mandate—employment and inflation—are “roughly balanced.” The minutes are expected to reflect a slightly optimistic view on inflation, though not as robust as what might be inferred from the decision to cut rates.
Impact of Upcoming CPI Data:
- The CPI data set to be released tomorrow is crucial, as it could influence whether the dollar gains further strength. The DXY index has yet to surpass the recent high from Friday’s jobs report, suggesting hesitance among buyers at these elevated levels.
Market Sentiment:
- If the CPI data shows monthly gains easing, a modest retracement in the dollar may follow, reflecting reduced conviction in sustaining strong buying momentum.

Conclusion: Today’s release of the FOMC minutes will be closely watched for insights into the Fed’s sentiment around the recent rate cut and inflation outlook. The upcoming CPI data will play a pivotal role in shaping market expectations for the dollar’s trajectory.

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