The FOMC releases its latest meeting minutes today (12-Oct-2011)

OVERVIEW

The FOMC releases its latest meeting minutes on Wednesday. In September, Ben Bernanke & Co. went ahead with Operation Twist, consisting on selling short-term debt to buy longer-dated Treasuries. Markets will be focusing, firstly on any discussion about deflation, as any mention about the threat of lower prices could discard the possibility of QE3. Secondly, the market will also be eager to understand at what extend there was consensus about the notion that the economy faces “significant downside risks.”

POTENTIAL USD REACTION

If there was a lot of debate about the need for any stimulus and the only reason they chose Operation Twist was to give the market something instead of nothing, it would be a major disappointment that could lead to a renewed rally in the greenback.  At the time, there was no mention of additional asset purchases in the FOMC statement and by not mentioning QE3, it certainly appears that the central bank could be saving their few remaining bullets in case the volatility in the financial markets intensifies or the U.S. economy falls into recession.

By
M.Zohaib Gadit
Forex Trading Consultant