Anna 
On Wednesday, the Federal Reserve (Fed) is scheduled to release the minutes of its March policy meeting, drawing attention from investors eager for insights into the inflation outlook and potential timing of a policy shift.
The Fed maintained its monetary policy settings following the March meeting, aligning with expectations. However, the revised Summary of Economic Projections, or the dot plot, indicated policymakers’ projection of a total of 75 basis points reduction in the policy rate by 2024.
Chairman Jerome Powell reiterated the need for “greater confidence” in inflation moving towards the 2% target sustainably before considering interest rate cuts. Despite market anticipation of a policy pivot in June, hawkish comments from Fed officials post-March meeting and robust labor market data prompted a reassessment of the rate outlook.
Various Fed officials offered differing perspectives on the rate outlook, with Atlanta Fed President Raphael Bostic anticipating a rate cut later in the year, while Dallas Fed President Lorie Logan expressed hesitance, citing inflation risks. Minneapolis Fed President Neel Kashkari indicated the possibility of rate cuts but highlighted the importance of inflation trends.
The release of the March jobs report, showcasing a significant increase in Nonfarm Payrolls, further impacted rate cut expectations, leading to a decline in the probability of a June rate cut according to the CME FedWatch Tool.
Analysts anticipate discussions on short-term policy outlook and quantitative tightening tapering to dominate the March FOMC Minutes. However, the impact on the USD’s valuation may be limited, given the earlier release of the Consumer Price Index (CPI) data for March, likely to have a more substantial effect on the market’s perception of the Fed’s policy stance.
Nonetheless, if the FOMC Minutes reveal optimism about the inflation outlook despite strong CPI data for January and February, the USD could face downward pressure. Conversely, indications of a delay in rate cuts amid tight labor market conditions could bolster the USD.
From a technical standpoint, the USD Index (DXY) faces key support at the 200-day Simple Moving Average (SMA) at 103.80, with potential resistance at 104.70 and further levels at 105.00 and 105.80.
Overall, market participants remain attentive to the Fed’s guidance and its implications for the USD’s trajectory, especially in light of evolving economic conditions and policy considerations.
