The most important piece of event risk on the economic calendar this week is today's FOMC minutes. We believe that the Fed minutes will be as unsatisfying as the last monetary policy meeting, which means that the impact on the U.S. dollar should be minimal. Don't expect any optimism in the Fed statement because in the run up to the meeting, economic data was weak enough to justify additional action. If anything, the minutes should reflect more concern within the central bank, which could be mildly negative for the U.S. dollar.
When the central bank last met, they dropped very little hints about future monetary policy. This should not come as a surprise to anyone since U.S. policymakers have been divided on the need for a third round of Quantitative Easing for months. While the Federal Reserve admitted that the economy was decelerating, they chose to repeat they were prepared to take action if the economy weakened further. This promise has fallen on deaf ears because global economic conditions would need to deteriorate significantly for the central bank to follow through with more action. However their decision to keep policy unchanged and ride out the weak data proved to be the right move because since then we have seen improvements in the labor market and consumer spending. The FOMC minutes are a bit dated which may be a reason why investors will shrug off any negative sentiments. The FOMC minutes should have very little impact on the U.S. dollar.
Comments from Federal Reserve President Lockhart, who is a voting member of the FOMC this year confirms that the central bank has grown less willing to increase monetary stimulus. Traditionally Lockhart is one of the more dovish members of the FOMC but today, he said "there is a risk to monetary policy being employed too aggressively and without effect" to addressing problems that can only be solved with fiscal reform. While he added that "monetary policy can exert a powerful positive influence on the economy," it "is not a panacea."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.