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Dollar Advances after the Hawkish July FOMC Meeting Minutes

The dollar index (DXY00) Wednesday rose by +0.27% and posted a 1-1/4 month high. Higher T-note yields Wednesday supported moderate gains in the dollar.  Also, the fall in the S&P 500 to a 5-week low sparked liquidity demand for the dollar. In addition, weakness in the yuan was bullish for the dollar after the yuan dropped to a 9-1/4 month low against the dollar on Chinese economic concerns.  Gains in the dollar accelerated Wednesday afternoon when the minutes of the July FOMC meeting stated policymakers saw “significant” inflation risks that may merit more rate hikes.   

Wednesday’s U.S. economic news was mixed for the dollar.  On the bullish side, Jul housing starts rose +3.9% m/m to 1.452 million, stronger than expectations of 1.450 million.  Also, Jul manufacturing production unexpectedly rose +0.5% m/m, stronger than expectations of no change.  Conversely, Jul building permits, a proxy for future construction, rose +0.1% m/m to 1.442 million, weaker than expectations of 1.463 million.

The July 25-26 FOMC meeting minutes were hawkish for Fed policy and bullish for the dollar as they stated, “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.  “

EUR/USD (^EURUSD) Wednesday fell by -0.29%.  The euro Wednesday gave up an early advance and dropped to a 1-1/4 month low as the dollar strengthened on the hawkish minutes of the July 25-26 FOMC meeting.  EUR/USD Wednesday initially moved higher after news showed Eurozone Jun industrial production unexpectedly rose.

Eurozone Jun industrial production unexpectedly rose +0.5% m/m, stronger than expectations of no change.

USD/JPY (^USDJPY) on Wednesday rose by +0.53%.  The yen on Wednesday moved lower for the eighth consecutive session and posted a 9-1/4 month low against the dollar.  Central bank divergence is weighing on the yen, with the BOE, ECB, and Fed in the middle of their rate hiking cycles while the BOJ maintains QE and record-low interest rates.  Losses in the yen accelerated Wednesday after the 10-year T-note yield rose to a 9-1/2 month high.

October gold (GCV3) Wednesday closed down -6.7 (-0.35%), and Sep silver (SIU23) closed down -0.121 (-0.53%).  Precious metals prices Tuesday gave up an early advance and moved lower, with gold falling to a 7-week low.  A stronger dollar on Wednesday weighed on metals prices.  Higher global bond yields on Wednesday also undercut precious metals.  Losses in metals accelerated Wednesday on the hawkish minutes of the July FOMC meeting when policymakers saw “significant” inflation risks that may merit more rate hikes.  Silver prices also fell after JPMorgan Chase and Barclays cut their China 2023 GDP estimates, a bearish factor for industrial metals demand.  In addition, fund liquidation in gold continues after long gold holdings in ETFs fell to a 3-1/3 year low on Tuesday.

Precious metals on Wednesday initially moved higher as the deepening liquidity crisis in China boosted safe-haven demand for precious metals after Zhongrong International Trust missed payments on dozens of its investment products.  Silver prices found early support on signs of strength in industrial metals demand after Wednesday’s news showed Eurozone Jun industrial production and U.S. Jul manufacturing production rose more than expected. 

More Forex News from Barchart

Stocks Mixed as Markets Await Minutes of the July FOMC Meeting

Dollar Finds Support on Higher Bond Yields and Weak Stocks

Stocks Fall on Weakness in Banks and Chinese Economic Concerns

Strong T-Note Yields and Weak Asian Currencies Boost the Dollar

On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Summarize this content to 100 words
The dollar index (DXY00) Wednesday rose by +0.27% and posted a 1-1/4 month high. Higher T-note yields Wednesday supported moderate gains in the dollar.  Also, the fall in the S&P 500 to a 5-week low sparked liquidity demand for the dollar. In addition, weakness in the yuan was bullish for the dollar after the yuan dropped to a 9-1/4 month low against the dollar on Chinese economic concerns.  Gains in the dollar accelerated Wednesday afternoon when the minutes of the July FOMC meeting stated policymakers saw “significant” inflation risks that may merit more rate hikes.   Wednesday’s U.S. economic news was mixed for the dollar.  On the bullish side, Jul housing starts rose +3.9% m/m to 1.452 million, stronger than expectations of 1.450 million.  Also, Jul manufacturing production unexpectedly rose +0.5% m/m, stronger than expectations of no change.  Conversely, Jul building permits, a proxy for future construction, rose +0.1% m/m to 1.442 million, weaker than expectations of 1.463 million.

The July 25-26 FOMC meeting minutes were hawkish for Fed policy and bullish for the dollar as they stated, “most participants continued to see significant upside risks to inflation, which could require further tightening of monetary policy.  “EUR/USD (^EURUSD) Wednesday fell by -0.29%.  The euro Wednesday gave up an early advance and dropped to a 1-1/4 month low as the dollar strengthened on the hawkish minutes of the July 25-26 FOMC meeting.  EUR/USD Wednesday initially moved higher after news showed Eurozone Jun industrial production unexpectedly rose.Eurozone Jun industrial production unexpectedly rose +0.5% m/m, stronger than expectations of no change.USD/JPY (^USDJPY) on Wednesday rose by +0.53%.  The yen on Wednesday moved lower for the eighth consecutive session and posted a 9-1/4 month low against the dollar.  Central bank divergence is weighing on the yen, with the BOE, ECB, and Fed in the middle of their rate hiking cycles while the BOJ maintains QE and record-low interest rates.  Losses in the yen accelerated Wednesday after the 10-year T-note yield rose to a 9-1/2 month high.October gold (GCV3) Wednesday closed down -6.7 (-0.35%), and Sep silver (SIU23) closed down -0.121 (-0.53%).  Precious metals prices Tuesday gave up an early advance and moved lower, with gold falling to a 7-week low.  A stronger dollar on Wednesday weighed on metals prices.  Higher global bond yields on Wednesday also undercut precious metals.  Losses in metals accelerated Wednesday on the hawkish minutes of the July FOMC meeting when policymakers saw “significant” inflation risks that may merit more rate hikes.  Silver prices also fell after JPMorgan Chase and Barclays cut their China 2023 GDP estimates, a bearish factor for industrial metals demand.  In addition, fund liquidation in gold continues after long gold holdings in ETFs fell to a 3-1/3 year low on Tuesday.

Precious metals on Wednesday initially moved higher as the deepening liquidity crisis in China boosted safe-haven demand for precious metals after Zhongrong International Trust missed payments on dozens of its investment products.  Silver prices found early support on signs of strength in industrial metals demand after Wednesday’s news showed Eurozone Jun industrial production and U.S. Jul manufacturing production rose more than expected. More Forex News from Barchart

Stocks Mixed as Markets Await Minutes of the July FOMC Meeting

Dollar Finds Support on Higher Bond Yields and Weak Stocks

Stocks Fall on Weakness in Banks and Chinese Economic Concerns

Strong T-Note Yields and Weak Asian Currencies Boost the Dollar
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

https://www.nasdaq.com/articles/dollar-advances-after-the-hawkish-july-fomc-meeting-minutes Dollar Advances after the Hawkish July FOMC Meeting Minutes

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