The US dollar initially fell but quickly reversed course and has now surged to the best levels of the day on indications the FOMC won't hesitate to deliver one or more half-point rate hikes.
The commodity currencies are bearing the brunt of the US dollar move as US equities tumble. The S&P 500 is down 1.4% and the Nasdaq down 2.7%, both sliding further after the report's release. EUR/USD is down 20 pips to 1.0881 on the day with the entire fall coming after the minutes.
The comments in the report appear to be teeing up a 50 bps hike on May 4 with market pricing now up to 85% from 82% before the report. But the minutes also highlight the risk of more half-point hikes.
"Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified," the text says.
Given higher commodity prices since the Ukraine war and the potential for worsening supply chains on the Shanghai lockdown, upside risks to inflation have likely increased.
In general though, market moves on the FOMC minutes don't last because they reflect older views and data. After an initial surge higher, US Treasury yields have given back some of the rise. Keep an eye on that front.
