Hawkish FOMC Mins Boost Dollar
Dollar Bouncing Back
The US Dollar is seeing a mild recovery off the week’s lows printed yesterday as DXY gapped lower in response to the US/Iran ceasefire deal being announced. DXY plunged almost 1% on the news, dragged lower by the roughly 25% drop in crude prices. However, uncertainty around the ceasefire has seen oil prices creeping back up off yesterday’s lows, leading USD higher accordingly. Warnings from Iran against Israel over its attacks on Lebanon as well as confusion around the Strait of Hormuz reopening is prompting fresh uncertainty on Thursday with USD likely to continue to grind higher if oil prices push up further.
Hawkish FOMC Minutes
USD has also been helped higher by the FOMC minutes yesterday which leaned to the hawkish side as expected. Powell and co were seen discussing the risks around the Iran war and their impact on inflation. Policymakers were seen expressing caution over the path of inflation which they agreed would now likely take longer to bring back down into target range. While many still saw support for further rate cuts down the line, near-term, risks were seen as more two-sided with the possibility that rate hikes might need to be discussed if inflation continues higher. Traders now look ahead to tomorrow’s headline CPI release, expected to show a fresh increase in inflation. If confirmed, USD should find a further bid into the weekend as traders turn more hawkish on the Fed.
Technical Views
DXY
For now, DXY remains below the 99.15 level following the gap lower yesterday. While below here, risks are tilted towards a deeper drop lower to 98.24 and a retest of the broken bear trend line below. If bulls get back above 99.15, the broader bull outlook will be restored putting focus back on 100.36 near-term.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.