The minutes of the FOMC meeting held in July 30-31 indicated that a “vast majority” of members believed “it would likely be appropriate to ease policy at the next meeting.”

Although policymakers agreed to keep interest rates unchanged back then, the minutes also revealed that some officials were inclined to start cutting in July rather than waiting for September.

“All participants supported maintaining the target range for the federal funds rate at 5¼ to 5½ percent, although several observed that the recent progress on inflation and increases in the unemployment rate had provided a plausible case for reducing the target range 25 basis points at this meeting or that they could have supported such a decision.”

Link to FOMC meeting minutes (July 30-31)

Furthermore, committee members noted that recent data increased their confidence that inflation is moving sustainably towards the 2% target” but warned that “further gradual easing in labor market conditions could transition to a more serious deterioration.”

Market Reactions

U.S. Dollar vs. Major Currencies: 5-min

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar, which had already been edging lower a few hours ahead of the FOMC minutes release thanks to the annual NFP revisions, took a sharper tumble across the board upon seeing additional confirmation of a likely September rate cut.

USD/JPY chalked up the steepest drop, as the bearish momentum had already been in play since the pair retreated from the 146.00 handle in the previous trading session. Still the dollar pulled higher after its post-FOMC minutes dip, as traders likely booked profits when the report was mostly in line with expectations.