Fed officials seem more relaxed about the state of the economy, judging by the contents of the March 13 FOMC Minutes released last night. At the previous meeting held late in January, some policy-makers felt that additional monetary easing may well be required before too long because of the sluggish nature of the recovery. That position has now shifted – additional stimulus will only be forthcoming: "if the economy lost momentum" or should inflation stay below the 2% target. At the same time, the US central bank still believes that the economy needs an extended period of record-low interest rates (through to the end of 2014). Some members of the FOMC are unconvinced that the improvement in the labour market witnessed over the past couple of quarters will be sustained in the months ahead. In response to the Fed's more hawkish tone, the dollar recorded instantaneous gains against the majors of around 1% - the euro for instance is now at 1.32, cable is under 1.59 and USD/JPY almost touched 83.0 overnight. Risk appetite has suffered – the 10yr treasury yield jumped 15bp to 2.30% at one stage. US equities were lower (although not by that much), and the Nikkei has fallen by more than 2% overnight.
Also in today's Daily Forex Brief:
- The importance of March payrolls
- A sunny Britain
- Brazilian PM opens her cheque-book