Talking Points:

-Rate guidance to change as unemployment falls

-EM turmoil could pose risks

-Fed’s Fisher, Plosser dissented against the repo tool extension

-Several FOMC members favored a $10B QE taper per meeting

-Some FOMC members favored ‘qualitative guidance’

-FOMC sees risks from inflation that persists below 2%

-Second half of 2013 was better than expected

-Low rates favored amid low inflation

Fed minutes from the January 28th-29th meeting presented market participants with a clearer summary as to current sentiment among FOMC members in regards to the reduction in Quantitative Easing as well as guidance moving forward. ‘Qualitative guidance’ was favored by some members on the FOMC while several participants supported a $10B tapering of asset purchases per meeting. That step would certainly clear up any doubt that the Fed will end QE in 2014, but it may lead to a more risk off environment in markets.

It is important to note that two known hawks on the FOMC, Fisher and Plosser, both dissented against the repo tool extension that was announced at the January meeting. These two members were not on the voting committee last year, but will certainly make themselves heard in 2014 under the dovish Janet Yellen.

EUR/USD February 19, 2014 (5-Minute Chart)

USDollar_Finds_Strength_Amid_January_Fed_Minutes_body_Picture_1.png, USDollar Finds Strength Amid January Fed Minutes

Source: FXCM Marketscope

The greenback is gaining strength following the FOMC minutes and EUR/USD continues to press fresh session lows below the 1.38 level. US equities are just starting to head lower twenty minutes following the release, but emerging market currencies have been pressing lows all day. If the S&P 500 futures contract closes down today, it will have ended one of the largest consecutive daily rallies in history.

Gregory Marks, DailyFX Research Team

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