• The EUR/USD rallied close to 50 pips after the release of the July minutes.
• All Fed members agreed to hike 75 bps in the July meeting.
• Fed members acknowledge they would slow the pace of tightening at “some point.”

The EUR/USD jumped during the last hour due to the release of July’s Federal Reserve Open Market Committee (FOMC) minutes, which lifted the shared currency near the highs of the day, reached earlier, at 1.0198, though stabilized around the highs 1.0180s. At the time of writing, the EUR/USD is trading at 1.0190.

Summary of the FOMC minutes

The US Federal Reserve revealed in its minutes that all the participants agreed to hike rates by 75 bps, while many of them saw the Fed could tighten more if necessary. Fed officials added that future hikes would depend on incoming data while acknowledging that it would be appropriate to slow the pace of increases at some point.

Regarding inflation, Fed members said that there was “little evidence” of inflation subsiding and recognized it would take “considerable” time for the situation to be resolved. Concerning economic conditions, policymakers expressed that a strong labor market suggests economic activity is stronger than implied by the weak Q2 reading, raising the possibility of an upward GDP revision.

EUR/USD reaction

The EUR/USD rallied sharply, as shown by the 5-minute chart below. Even though the pair dipped towards 1.0185, buying pressure lifted the pair towards the daily high at 1.0202. Market participants’ interpretation of the minutes is perceived as dovish, despite pushing back efforts by Fed speakers in the last couple of weeks.

EUR/USD 5-minute chart

In the meantime, the US Dollar Index trimmed earlier gains and edged up 0.02% at 106.511, while the US 10-year bond yield rose seven bps at 2.884%, following the release of the minutes.

Aside from this, earlier US data revealed by the Department of Commerce reported that Retail sales for July increased by 10.3% YoY, exceeding forecasts of 8.3%, while the monthly reading was unchanged, missing expectations. Excluding autos and gasoline, sales jumped 0.4% YoY, vs. -0.1%.

EUR/USD Key Technical Levels