Dollar Makes Gains Following Strongly Worded July FOMC Meeting Minutes

dollar gains
The dollar index (DXY) chart on Tradingview.com

The dollar index (DXY) saw a +0.27% rise on Wednesday, reaching a 1-1/4 month high. The dollar experienced moderate gains, backed by higher T-note yields and increased liquidity demand triggered by the S&P 500 hitting a 5-week low. The dollar was also boosted by the yuan’s weakness, as it dropped to a 9-1/4 month low against the dollar due to concerns about the Chinese economy. Furthermore, the dollar gained momentum after the July FOMC meeting minutes revealed policymakers’ apprehensions about “significant” inflation risks, possibly leading to more rate hikes.

On the U.S. economic front, Wednesday brought mixed news for the dollar. Positive data included a +3.9% m/m rise in July housing starts to 1.452 million, surpassing the 1.450 million expectation. Additionally, July manufacturing production unexpectedly increased by +0.5% m/m, beating expectations of no change. However, July building permits, an indicator for future construction, only rose +0.1% m/m to 1.442 million, falling short of the anticipated 1.463 million.

EUR/USD The euro (EURUSD) experienced a -0.29% decline on Wednesday. Despite an initial boost following news of an unexpected +0.5% m/m rise in Eurozone Jun industrial production, the euro later dropped to a 1-1/4 month low due to the dollar’s strength resulting from the hawkish July 25-26 FOMC meeting minutes.

USD/JPY USDJPY marked a +0.53% increase on Wednesday. The yen’s decline continued for the eighth consecutive session, reaching a 9-1/4 month low against the dollar. The divergence in central bank policies played a role in this, as the BOE, ECB, and Fed engage in rate hikes while the BOJ maintains QE and record-low interest rates. The yen’s losses accelerated as the 10-year T-note yield hit a 9-1/2 month high.


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Gold and Silver Performance October gold (GCV3) closed down -6.7 (-0.35%) on Wednesday, and September silver (SIU23) closed down -0.121 (-0.53%). Precious metals prices faced downward pressure, with gold reaching a 7-week low. A stronger dollar and higher global bond yields contributed to the decline. The hawkish FOMC meeting minutes further intensified the losses, as policymakers expressed concerns about “significant” inflation risks. Silver prices were also impacted by reduced China 2023 GDP estimates from JPMorgan Chase and Barclays, impacting industrial metals demand. Additionally, gold saw fund liquidation as holdings in ETFs dropped to a 3-1/3 year low.

Precious metals initially saw gains due to the liquidity crisis in China, which increased safe-haven demand. Silver also received support from Eurozone Jun industrial production and higher-than-expected U.S. Jul manufacturing production.

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