US Dollar holds up as interest-rate dislocation takes over DollarIndex UnitedStates Macroeconomics SEO
Daily digest: US Dollar to face a lot of moving parts this Thursday
More labor-market related data will come out at 12:30 GMT, namely the initial and continuing jobless claims for the week ended June 30. Initial claims are expected to edge up to 245,000 from 239,000 a week earlier, while the continuing claims are expected to increase from 1.742 million to 1.751 million. The Institute for Supply Management will come out with several indicators about the services sector at 14:00 GMT. The Services Purchasing Managers Index for June is expected to increase from 50.
The Chinese central bank, the People’s Bank of China , is stepping up its efforts to support the Yuan by fixing the Chinese currency this morning at 7.2098, lower than the 7.2458 estimated. The release of the Fed FOMC Minutes showed that there was a vote split in June, with some hawks in favor of hiking interest rates. This was considered as hawkish by market participants, as did the closing remark that all officials expect more rate increases, in plural, for the remainder of 2023.
The benchmark 10-year US Treasury bond yield halted trading at 3.96% on Thursday after a wild ride on Wednesday evening, when the FOMC Minutes got published. Equities drop and bonds sold off, making rates shoot higher as more hikes look inevitable in the fall of this year. The US Dollar jumped substantially in the first reaction on the FOMC Minutes on Wednesday, only to pare back some of its gains against a few of the G10 currencies.
When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing . QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
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