• The minutes of the Fed’s November 7 meeting will be published later.
• The focus is on the Committees’ view of a potential move in December.
• The US Dollar Index remains near its recent cyclical highs.

The minutes of the US Federal Reserve (Fed) meeting on November 6-7 will be published on Wednesday at 19:00 GMT.

The committee further eased monetary policy by cutting interest rates by 25 basis points on November 7, after a surprising gigantic interest rate cut in September took markets by surprise.

At the event, Federal Reserve Chairman Jerome Powell reportedly avoided giving any clear signals that the central bank might pause its interest rate cut cycle in the near future, despite a widely expected 25 basis point cut. Fed policymakers noted that the labor market had “broadly calmed down” while inflation appeared to be heading toward the Fed’s 2% target.

Powell also did not indicate that a pause was being considered, and analysts interpreted his comments as suggesting the Fed might aim for interest rates below 4% – or close to it – before considering a pause. Additionally, Powell reiterated that the upcoming election will not impact the Fed’s short-term policy decisions, emphasizing that the central bank does not speculate on how political outcomes might affect its goals.

Since the interest rate decision in early November, U.S. economic data has remained solid, signaling solid fundamentals as October inflation, tracked by the Consumer Price Index (CPI), picks up. However, Powell’s recent comments made it clear that the Fed is in no rush to cut interest rates further, which is consistent with the view of FOMC Governor Michelle Bowman.

CME Group’s FedWatch Tool currently puts the probability of a quarter-point rate cut at the December 18 meeting at almost 60%, up from about 75% a month ago.

How might the release of FOMC minutes affect the US dollar?

While another 25-basis-point rate cut seems like a logical next step, investors shouldn’t discount the possibility of keeping rates low – or even hawkish.

The “red action” that accompanied Donald Trump’s victory in the November election has revived expectations of U.S. tariffs, looser fiscal policy and corporate deregulation, all of which could sooner or later raise inflationary pressures. This scenario may threaten the continuation of the Fed’s monetary policy easing cycle, potentially forcing the central bank to suspend or even stop interest rate cuts. Could interest rate increases be back on the table?

Senior analyst Pablo Piovano at FXStreet notes that “a look at the US Dollar Index (DXY) technicals shows immediate resistance at the 2024 high at 108.07 (November 22). Breaking above this level should encounter little resistance until the November 2022 high of 113.14 (November 3).”

“On the other hand, sporadic downside moves should find further support at the critical 200-day SMA at 103.98,” Pablo adds.