The April FOMC minutes were released today and the hawkish bias led
to a fall in investor risk sentiment. The minutes showed the Fed was
worried the March meeting was interpreted as too dovish by investors and
that a June rate rise would be “appropriate” if economic data continue
The initial market reaction looked similar to regime that led to the
selloffs last August and at the beginning of this year, namely USD up
and emerging markets down (see below).Equities managed to finish flat
and we have yet to see how Asian markets react to the news but it may
take a few trading sessions to determine the markets interpretation of
the FOMC minutes.
If you’re feeling whipsawed you’re not alone. In March Janet Yellen’s
dovish speech at the New York economic club added to the Fed’s dovish
March statement causing risk assets to rally. Now the April meeting
minutes show the Fed’s hawkish sentiment increased just a few weeks
later at the April meeting and the press statement failed to suggest
this shift in tone. Goes to show how erratic Fed communication has been.