The US dollar held near a one-month high on Wednesday after minutes from the May Federal Open Market Committee meeting showed officials agreed that their current patient approach to setting monetary policy could remain in place "for some time."
Policymakers saw little need to change rates in either direction. A rate hike in 2019 is unlikely, even as the US economy continues to grow and inflation remains muted, the minutes showed. "People were looking for any type of pessimism that would lead to (the Federal Reserve) cutting rates. But at this moment they don't want to do that," said Juan Perez, senior foreign exchange trader and strategist, Tempus, Inc.
The message communicated, Perez said, was that the FOMC "cannot afford to either hike or lower rates." The Federal Reserve's last meeting came before US President Donald Trump's administration increased tariffs on Chinese goods and intensified global trade tensions further with restrictions on Chinese telecom giant Huawei Technologies Co Ltd . The potential economic risks of a trade war were therefore not a main topic of discussion.
"Clearly with the flare-up in trade tension between the US and China since the meeting, that brought up the downside risk for growth. The minutes seem a bit stale at this point," said Matthew Luzzetti, chief US economist at Deutsche Bank. Against a basket of rivals, the dollar was steady at 98.071 and just shy of a one-month high of 98.134. While investors in risky assets heaved a sigh of relief after the United States eased trade restrictions on Huawei, the lack of a significant breakthrough has kept them on edge.
Stronger safe-haven assets, namely the Japanese yen and Swiss franc up 0.17% and 0.20% respectively, indicated lingering skepticism. Sterling was the biggest loser towards the end of the North American session down 0.35% to $1.266. It had earlier fallen to its lowest since Jan. 4 after political uncertainty in Britain deepened as Prime Minister Theresa May's final attempt to seal a Brexit deal failed to win over opposition lawmakers and many in her own party.
May resisted growing calls to resign on Wednesday, vowing to press on despite mounting opposition from lawmakers. In the latest blow to the prime minister, prominent Brexit supporter Andrea Leadsom resigned from May's cabinet, saying she could no longer support the government's approach to negotiating an exit from the European Union. Elsewhere, the euro was little changed, last 0.02% weaker at $1.115.