USD retreats slightly ahead of Fed meeting minutes report

Daily Currency Update

The US dollar, after starting the week on a bullish note, lost some strength today. The greenback has largely benefitted from positive retail sales data for July, which was released yesterday. The Federal Reserve is set to release the Industrial Production figures and publish the minutes of the July policy meeting later today. The US Census Bureau revealed today that Housing Starts rose 3.9% monthly in July, following the 11.7% drop (revised from -8%) in June. This reading came in better than the market anticipation for a growth of 2.7%. In the same period, Building Permits, which declined 3.7% in June, increased 0.1%.

Fitch Ratings announced in its quarterly Global Economic Outlook that they have dropped medium-term Gross Domestic Product (GDP) for 10 developed economies. Fitch noted there is also a possibility of a sustained decline in the job force participation rates. This announcement didn’t seem to impact the US market drastically, as retail sales data gave additional evidence of a resilient US economy. Markets are taking this combination of data as a sign that the Fed is far from done raising the interest rates to cool the economy and bring down inflation. Minneapolis Fed President Neel Kashkari commented that it might be too soon to say the central bank's fight against inflation should end, noting he thinks inflation is still too high.