US Dollar stays near multi-month highs ahead of Fed minutes
- The US Dollar came under modest selling pressure on Wednesday.
- The US Dollar Index stabilizes above 103.00 following a four-day winning streak.
- US Federal Reserve will release the minutes of July policy meeting later in the day.
The US Dollar lost some strength on Wednesday after starting the week on a bullish note. The USD Index – which tracks the USD’s valuation against a basket of six major currencies – retreated toward 103.00 from the one-month high it set near 103.50 on Monday.
The USD benefited from the upbeat July Retail Sales data released on Tuesday, but failed to extend its rally. After Fitch Ratings analysts told CNBC that they could downgrade several big lenders, including J.P. Morgan, the benchmark 10-year US Treasury bond yield declined sharply, limiting the USD’s potential gains.
The Federal Reserve will release Industrial Production figures and publish the minutes of the July policy meeting later in the day.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Canadian Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.03% | -0.38% | 0.21% | 0.13% | 0.16% | 0.03% | 0.07% | |
| EUR | 0.03% | -0.35% | 0.22% | 0.15% | 0.20% | 0.05% | 0.16% | |
| GBP | 0.40% | 0.38% | 0.61% | 0.53% | 0.56% | 0.43% | 0.47% | |
| CAD | -0.21% | -0.22% | -0.61% | -0.07% | -0.02% | -0.17% | -0.12% | |
| AUD | -0.13% | -0.13% | -0.53% | 0.05% | 0.02% | -0.09% | -0.06% | |
| JPY | -0.17% | -0.21% | -0.58% | 0.01% | -0.03% | -0.16% | -0.11% | |
| NZD | -0.03% | -0.05% | -0.41% | 0.17% | 0.14% | 0.14% | 0.04% | |
| CHF | -0.10% | -0.09% | -0.48% | 0.13% | 0.03% | 0.10% | -0.04% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Daily digest market movers: US Dollar consolidates gains ahead of FOMC Minutes
- The monthly data published by the US Census Bureau revealed on Wednesday that Housing Starts rose 3.9% on a monthly basis in July, following the 11.7% decline (revised from -8%) recorded in June. This reading came in better than the market expectation for a growth of 2.7%. In the same period, Building Permits, which fell 3.7% in June, increased 0.1%.
- Fitch Ratings announced in its quarterly Global Economic Outlook on Wednesday that they have lowered medium-term Gross Domestic Product (GDP) growth projections for 10 developed economies. Fitch added that there is also likely to be a sustained fall in labour force participation rates – relative to pre-pandemic trends – in the US and the UK.
- Retail Sales in the US rose 0.7% on a monthly basis in July to $696.4 billion, data published by the US Census Bureau showed Tuesday. This reading followed the 0.3% (revised from 0.2%) increase recorded in June and came in better than the market expectation of 0.4%. Retail Sales Control Group increased 1% in the same period.
- Other data from the US showed that the headline General Business Conditions Index of the Federal Reserve Bank of New York’s Empire State Manufacturing survey slumped to -19 in August from 1.1 in July.
- Wall Street’s main indexes opened modestly higher on Wednesday following Tuesday’s selloff.
- Early Wednesday, US stock index futures trade modestly higher on the day.
- Minneapolis Federal Reserve President Neel Kashkari said on Tuesday that he is feeling good about the progress on inflation but added that it was still too high. “The question is, have we done enough, or do we need to do more,” he added, noting that Fed policymakers have been surprised by the economy’s resilience.
- In a report published earlier in the week, Goldman Sachs said that they expect the Federal Reserve to start lowering the policy rate in the second quarter of 2024.
- According to the CME Group FedWatch Tool, markets are pricing in a nearly 30% probability of one more 25 basis point (bps) Fed rate hike before the end of the year.
- The US Department of Labor will publish the weekly Initial Jobless Claims data on Thursday.
Technical Analysis: US Dollar Index remains technically bullish
The US Dollar Index (DXY) peaked above the 200-day Simple Moving Average (SMA) – currently located at 103.30 – on Monday but failed to make a daily close there. Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart holds comfortably above 50, suggesting that the latest pullback is a technical correction rather than the beginning of a reversal.
In case DXY flips 103.30 into support, it could target 104.00 (psychological level) and 104.70 (May 31 high) next. On the downside, strong support seems to have formed at 102.30, where the 100-day and the 50- day SMA meet. A daily close below that level could attract sellers and open the door for an extended leg lower toward 102.00 (psychological level, static level) and 101.40 (static level).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.