Fed Minutes to offer clues on next rate cuts amid tariff turmoil

• The Minutes of the Fed's June 17-18 policy meeting will be published on Wednesday.
• Details surrounding the discussions on the decision to keep policy settings unchanged will be scrutinized by investors.
• Markets see virtually no chance of a 25 bps Fed rate cut in July. 

The Minutes of the United States (US) Federal Reserve's (Fed) June 17-18 monetary policy meeting will be published on Wednesday at 18:00 GMT. Policymakers decided to maintain the policy rate at the range of 4.25%-4.5%, but the revised Summary of Projections (SEP) showed that policymakers were projecting two 25 basis-point (bps) rate cuts in 2025.

Jerome Powell and co decided to hold policy settings unchanged after June meeting

The Federal Open Market Committee (FOMC) decided to keep the interest rate unchanged at the June meeting. In the policy statement, the US central bank reiterated that inflation was still "somewhat elevated," while labor market conditions remained solid with a low unemployment rate.

The SEP highlighted that policymakers still see a 50 bps reduction in the policy rate in 2025 but now forecast only a 25 bps cut in 2026, compared to the 50 bps projected in March's SEP. In the post-meeting press conference, Fed Chairman Jerome Powell reiterated that they don't need to be in a hurry to make any adjustments to the policy. 

Although several Fed officials noted that they are open to the idea of lowering the interest rate in July, the upbeat June employment report reaffirmed that the Fed is likely to wait until September to ease the policy. The Unemployment Rate declined to 4.1% from 4.2% in May and Nonfarm Payrolls rose by 147,000, surpassing the market expectation of 110,000.

When will FOMC Minutes be released and how could it affect the US Dollar?

The FOMC will release the minutes of the June 17-18 policy meeting at 18:00 GMT on Wednesday. Investors will scrutinize the discussions surrounding the policy outlook.

According to the CME FedWatch Tool, markets currently see virtually no chance of a rate cut in July and price in about a 36% probability of another policy hold in September. In case the publication shows that policymakers are unwilling to wait until after September to ease the policy, the US Dollar (USD) could come under renewed selling pressure with the immediate reaction. 

On the other hand, the USD could remain resilient against its rivals if the document suggests that policymakers could look to delay rate cuts in case US President Donald Trump's tariff decisions are seen as inflationary.

The White House announced late Monday that President Trump signed an executive order to push the deadline for implementing tariffs to August 1. However, letters sent out to trading partners by US President Donald Trump showed that they will be imposing 25% tariffs on Japan and South Korea. "If, for any reason, you decide to raise your tariffs, then, whatever the number you choose to raise them by, will be added on to the 25% that we charge," Trump said in letters shared on Truth Social.

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for the USD Index:

"The Relative Strength Index (RSI) indicator on the daily chart stays below 50 despite recovering steadily since early July. Additionally, the USD Index is yet to make a daily close above the 20-day Simple Moving Average (SMA), suggesting that another leg higher is needed to convince buyers."

"On the upside, 97.80 (Fibonacci 23.6% retracement of the mid-May-July downtrend, 20-day SMA, upper limit of the ascending regression channel) aligns as a key resistance level ahead of 98.50 (Fibonacci 38.2% retracement) and 99.00-99.10 (50-day SMA, Fibonacci 50% retracement). Looking south, support levels could be spotted at 96.80 (mid-point of the ascending channel), 96.30 (end-point of the downtrend) and 95.80 (lower limit of the ascending channel).