Synopsis: MUFG anticipates a hawkish undertone in the upcoming FOMC minutes, which may provide a boost to the US dollar. The bank cites the current financial conditions and recent market behavior as reasons for this stance.

Key Points:

• Tighter US Financial Conditions: Despite recent adjustments in US yields, the conditions remain substantially tighter than earlier in the summer, potentially prompting the Federal Reserve to hold rates.

• Market Reaction to NFP Report: The robust NFP report for September hasn't led to significant rate hike expectations. The market is pricing in about 4bps and 8bps rate hikes for the November and December FOMC meetings, respectively.

• Higher Bond Yields: Market players acknowledge the Fed's message: Rising bond yields are already curbing growth and inflation.

• Potential Impact of FOMC Minutes: While the forthcoming minutes may sound hawkish, MUFG doubts they will entirely counter the recent dovish shifts pressuring the US dollar.

Conclusion: The upcoming FOMC minutes might carry hawkish implications, but MUFG believes their influence on the US dollar will be limited in overturning the recent dovish trends.