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Balance Sheet Normalization Program Coming ’Relatively Soon’ According to FOMC Minutes

Balance Sheet Normalization Program Coming ’Relatively Soon’ According to FOMC Minutes

Dylan Jusino, Contributor

Talking Points

- The Committee intends to begin implementing the balance sheet normalization program ‘relatively soon’

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for next week on the DailyFX Webinar Calendar.

After the release of the July FOMC minutes, investors were left with an unclear picture as to when the Fed will begin unwinding its 4.47 trillion USD balance sheet. Overall, the Fed’s comments were dovish.

In the minutes,

“Members agreed that, at this meeting, the Committee should further clarify the time at which it expected to begin its program for reducing its securities holdings ina gradual and predictable manner. They updated thepostmeeting statement to indicate that while the Committeewas, for the time being, maintaining its existingreinvestment policy, it intended to begin implementing the balance sheet normalization program relatively soon, provided that the economy evolved broadly as anticipated.”

As the Federal Reserve looks to gradually exit the market it may have adverse impacts on capital markets. For now, traders can expect that the Fed will be especially cautious as it tries to avoid another "taper tantrum."

Chart 1: DXY Index 15-minute Timeframe (August 16, 2017 Intraday)


Leading up to the release of the minutes DXY dips below a short-term trend line. After the release, DXY continues to fall below 93.89 and traded around 93.51 at the time that this article was written.

--- Written by Dylan Jusino, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.