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Dollar Strengthens as Fed Minutes Signal Further Rate Hikes

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Equities

The US stocks posted the longest Bull Run in the history of the stock market despite trade disputes, inflation, and the global economic slowdown. However, Wall Street ended the session mostly lower with the Dow Jones Industrial Average and SPX500 ending a four-day winning streak. The major indices came under pressure as the minutes of the latest Fed meeting suggested that the rates are likely to rise in September. The Dow Jones Industrial Average lost 0.3% to 25733, and the SPX settled slightly lower at 2861. On the other hand, the tech-heavy Nasdaq Composite rose for the fifth consecutive session and closed at 7889, the highest close in two weeks. China and the U.S. imposed new tariffs on each other last night despite the undergoing trade talks, and the Trump administration threatens additional tariffs on $200 billion worth of goods if they didn’t reach a trade deal. Trump can go further with trade spats and be more aggressive as the major US indices hover near a record high.

USD

The dollar index which measures the greenback against a basket of major currencies bounced off a three-week low to trade at a high of 95.49 after the Federal Open Market Committee meeting minutes. DXY ended lower for five consecutive days and lost more than two percent weighed down by the remarks of President Trump on interest rates. The committee expects further gradual rate hikes and the growth to slow down slightly in the second half of the year. Many participants considered trade spats and emerging markets as downside risks to the economy. Generally speaking, the fundamentals that drove the dollar higher earlier this month are still the same, the fall was all about Trump's verbal intervention. The USDJPY rose to a high of 110.92, and the EURUSD tumbled to a low of $1.1541 during the Asian session.

Metals

Gold prices retreated from a one-week high pressured by the Fed's minutes. The gold ounce fell from a high of $1201 to trade at a low of $1186 ahead of the European trading session. On the other hand, the silver ounce tumbled to a low of $14.55 from a high of $14.87.

Oil

Oil prices advanced as the US Energy Information Administration reported a drop in the US crude oil inventories. The EIA said that the US crude oil inventories fell by 5.863 million barrels last week. The West Texas Intermediate crude futures climbed three percent to settle at $68.09 per barrel, and the Brent futures rose almost three percent to close at $74.86 per barrel, the highest close since July.

Major Economic Events

GMT Country Event Expectation Previous
11:30 EU ECB Publishes Account of Monetary Policy Meeting    
12:30 US Initial Jobless Claims 215 212
  US Jackson Hole Symposium    
14:00 US New Home Sales (Jul) 643 631

 
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