FOMC Minutes, Poole, Yellen remain hawkish

The minutes from the last FOMC meeting as well as two separate Fed speakers reflect diverging views from the inflation outlook espoused by Fed Chairman Bernanke in his Congressional testimony last week. Recall that Bernanke explicitly stated that "inflation pressures are beginning to diminish", helping the dollar to surrender the 1.3060 resistance against the euro and leading to a slide in treasury yields following his testimony before the Senate Banking Committee.

However, the FOMC minutes showed that inflation is still a valid concern among all the members via a unanimous opinion on the possibility of additional firming and a focus on persisting inflation risks. St. Louis Fed President William Poole commented that the Fed "must be ready to raise rates if CPI surprises on the upside". After this morning's uptick in the core CPI rate, this assessment becomes that much more relevant. Meanwhile, San Francisico's Fed member Janet Yellen, traditionally an inflation dove, has also sounded off on inflation as being higher than she would like.

We see this rhetoric as hardly indicative of leading to a rate-cutting bias in the near future and will look for the slide in USD as well as the treasury yields to subside in sessions to come.

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Analysis by Fx Money Trends