Amid yet another escalation in the Middle East, the minutes from the June Federal Reserve meeting went unnoticed, proving less hawkish than many market participants had expected. On the one hand, the document published on Wednesday made it clear that inflationary risks remain the Committee's primary concern. On the other hand, it did not provide the market with new (additional) arguments to revise expectations in favor of aggressive monetary tightening. The ambiguous signals in the minutes disappointed dollar bulls, despite the minutes' hawkish tone.
In the lead-up to the June meeting, investors gradually priced in a tighter trajectory for Fed monetary policy, especially following the release of strong May data on CPP and PPI growth. The results of the meeting largely met (and even exceeded) these expectations: the updated dot plot turned out to be more hawkish, allowing for one round of rate hikes in the second half of the year, and the rhetoric of new Chairman Kevin Warsh was perceived by the market as tougher compared to Jerome Powell's statements in previous meetings. As a result, many expected the minutes of the June meeting to show broad support for an imminent rate hike or at least demonstrate the formation of a corresponding consensus within the Committee. However, this did not happen.
The key message of the June meeting, reflected in the minutes, is that the Fed remains in wait-and-see mode rather than preparing for monetary tightening in the coming months.
On the one hand, several participants did indeed state that there were arguments for a rate hike as early as June.
On the other hand, the wording "a few" turned out to be significantly softer than market expectations, which had anticipated a much larger camp of supporters for tightening monetary policy. Moreover, many of the meeting participants emphasized the need to obtain additional data before any further decisions. As is known, the text of the minutes is meticulously checked—essentially, every word carries weight, not to mention entire phrases that change the meaning of the whole document. Therefore, such "not sufficiently hawkish" messages did not meet the inflated expectations of many market participants.
Another important point is that Committee members emphasized the high uncertainty regarding inflation prospects. In particular, the minutes repeatedly underscore that the effects of trade policy, geopolitical tensions, and other factors influencing price dynamics "cannot yet be assessed with sufficient certainty." In this context, the Fed made it clear that it intends to maintain flexibility and remain guided by incoming macroeconomic data.
In other words, the central bank did not provide the market with any clear signals that a rate hike at upcoming meetings is a baseline or likely scenario.
Markets reacted to the release accordingly: Treasury yields changed only slightly, and the dollar index even came under pressure. Meanwhile, the EUR/USD pair not only remained within the 14th figure but also tested (though unsuccessfully; the fact itself is important) the resistance level of 1.1450, which corresponds to the middle line of the Bollinger Bands indicator on the D1 timeframe.
Analyzing the June Fed minutes, it is also important to note another significant point. The June meeting chaired by Warsh clearly demonstrated a shift in the Fed's "communication philosophy."
Firstly, the style of communication has changed significantly. The minutes of the June meeting was noticeably more concise than the minutes from recent years of the "Powell era." It contained fewer detailed discussions, less attempt to explain the reasoning behind each scenario, and significantly fewer elements of "forward guidance," which refers to direct/translucent indicators regarding the future trajectory of monetary policy. All this aligns with Warsh's approach, which prefers not to predefine market expectations, leaving the Fed maximum freedom of action.
Secondly, under Warsh's leadership, the focus of discussions has shifted. While under Powell, a significant portion of the minutes was dedicated to the risks of economic slowdown and the state of the labor market, the June document placed primary emphasis on inflationary threats and the danger of entrenched high inflation expectations. Even this emphasis did not "transform" into an immediate readiness to hike rates—rather, it reflects a so-called "heightened vigilance."
Thus, the Fed minutes turned out to be more "moderately hawkish" than truly hawkish. The minutes reflected the Committee members' concern about inflation persistence and did not, in theory, rule out policy tightening. However, the document did not demonstrate broad consensus for an imminent rate increase. Against a backdrop of inflated market expectations, this outcome disappointed dollar bulls: the published minutes were not an ally for the greenback.
Therefore, if EUR/USD buyers continue to show resilience against the geopolitical backdrop, any downward corrections in the pair should be viewed as opportunities to open long positions. In this context, the "ceiling" of the established price range stands at the 1.1450 mark, which corresponds to the middle line of the Bollinger Bands indicator on the daily chart.
