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USD holds on to gains after FOMC meeting minutes

Thursday 18 August, 2022

Daily Currency Update

The dollar was up against a basket of major currencies on Thursday following yesterday's release of the Federal Reserve's meeting minutes in July which showed that policymakers plan to stick to its monetary tightening plan. However, it was also suggested that policymakers may need to shift course eventually to balance the risk of recession. “Ongoing increases in the target range for the federal funds rate would be appropriate” with policy needing to move to a “restrictive stance”, but that “it likely would become appropriate at some point to slow the pace of policy rate increases”. Core US retail sales come in at 0.4% versus an expected -0.1% which gave USD another boost yesterday. Today the Philly Fed Manufacturing Index came in at came in at 6.2, which is above analyst expectations of -5.0. The number, which many economists view as a leading indicator of business conditions and economic health in the country, returned to positive territory in August after two consecutive negative readings. The US Dollar Index was up 0.29% at 106.90 at the time of writing.        

Key Movers

Yesterday, the UK inflation rate came in higher than expected at 10.1%, a 40-year high. The rate is driven by soaring prices for food and fuel as households come under mounting pressure from the cost of living crisis. With the revelation that inflation could reach 13.3% later this year as well, price pressure doesn’t seem to be pulling back. This, alongside recession fears and the Federal Reserve seemingly continuing to tighten policy, has put GBP firmly under pressure against the USD. GBPUSD was down 0.32%, trading at around 1.2015 at the time of writing. In Europe, GDP quarterly figures yesterday came in at 0.6% which was slightly lower than the 0.7% expected. Following this, ECB board member Isabel Schnabel spoke on the outlook for the Eurozone, commenting on the inflationary pressures on potential growth in the short term, expectations of growth to slow and possible recession. Overall, a dismal outlook for the Eurozone could continue to weigh heavy on the EUR. EURUSD was down 0.45% at 1.01280 at the time of writing.  

Expected Ranges

  • EUR/USD: 1.0128 - 1.0197 ▼
  • GBP/USD: 1.1996 - 1.2084 ▼
  • AUD/USD: 0.69 - 0.6967 ▲
  • USD/CAD: 1.2882 - 1.2946 ▲