FOMC Mins Fail to Revive US Dollar
Dollar Down Again
The US Dollar remains weaker on the back of the July FOMC minutes released yesterday. Given that the minutes were interpreted as leaning more to the hawkish side, the price action today suggests that traders continue to attach more weight to the recent slump in US data. Weaker activity readings recently have seen rate hike expectations for September plummeting with the CME group now pricing in a roughly 30% chance of a hike down from around 70% at the start of last week.
Support For Hikes
Looking at the minutes themselves, alongside the three dissenting members who voted for a hike, several members were seen voicing support for rate hikes if inflation didn’t decline. This suggests that there were likely more members who were close to voting for a hike this time around. However, many agreed that there were clear downside risks to jobs and growth while upside inflation risks remain heavily tied to developments in the Middle East, which remain volatile and unpredictable. Since that meeting, however, we’ve seen softer jobs and inflation data alongside other weakness such as retail sales last week. As such, USD looks vulnerable to continued downside while traders await the next key data input or fresh headline on the US/Iran war.
Technical Views
DXY
The index continues to push lower on Thursday with price now below the 99.15 level. With momentum studies bearish, focus is on a test of the 98.24-level support next while bulls still need to see price back above 100.18 to alleviate downside risks.
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