Dollar extended this week's pull back as markets perceived the FOMC minutes of the September 16-17 meeting as a bit more dovish than expected. Policy members were concerned that the growth in US could be "slower than they expected if foreign economic growth came in weaker than anticipated." That included that "slower economic growth in China or Japan or unanticipated events in the Middle East or Ukraine might pose a similar risk." Also, some members expressed concern over appreciation of dollar due to "persistent shortfall of economic growth and inflation in the euro area" and that could "have adverse effects on the U.S. external sector." Regarding the dropping of "considerable time" in the statement, some policymakers were worried that could give false signals to the markets and trigger a rise in borrowing costs. The minutes noted that such change would "likely present communication challenges" and "caution will be needed to avoid sending unintended signals about the Committee's policy outlook."
Stock rebounded strongly after the release with Dow ended up 274 pts, or 1.64% at 16994.22, just failed to sustain above 17000 handle. S&P 500 also rose 33.79 pts, or 1.75% to close at 1968.89. Long-term yields were lower with 30-year yield making new low at 3.043 before closing at 3.062. Gold recovered further and is trading above 1220 handle while Crude Oil stayed pressured. Dollar index retreated further and is trading at around 85. for the momentum, comparing to last week's high of 86.74. Overall outlook in dollar stays bullish, nonetheless, as current pull back is viewed as a corrective move only.
Released in Asian session, Australian employment dropped -29.7k in September while unemployment rose to 6.1%. Aussie is mildly firmer after the release. UK RICS house price balance dropped to 30 in September. Japan machine orders rose 4.7% mom in August.
Looking ahead, BoE rate decision is the main focus today. The central bank is expected to hold rates unchanged at 0.50% and kept asset purchase target at GBP 375b. A brief statement is expected, making the release a non-event. ECB monthly bulletin and German trade balance will be released in European session. US will release initial jobless claims and wholesale inventories while Canada will release new housing price index.