Fed minutes support cautious upside – Commerzbank

Commerzbank’s Antje Praefcke notes that EUR/USD slipped below 1.18 as markets interpreted the January Fed minutes as slightly more hawkish, helped by stronger US labour data. She stresses that a March rate cut is now ruled out and fewer than two cuts are priced for 2026. Stronger PCE and Q4 GDP data could give the Dollar further support if they beat expectations.

Hawkish nuance lifts US currency

“This is certainly a matter of interpretation, especially against the backdrop of recent better-than-expected US labor market data.”

“Several participants indicated that they would have supported a two-sided description of the Committee’s future interest rate decisions, reflecting the possibility that upward adjustments to the target range for the federal funds rate could be appropriate if inflation remains at above-target levels.”

“The fact is that an interest rate cut in March is off the table and the market is not even fully pricing in two interest rate cuts this year.”

“Tomorrow’s US figures on the PCE index and Q4 GDP growth could give the dollar additional momentum against the backdrop of the Fed minutes if they exceed expectations.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)