USD Graphic Rewind 07.15
USD INDEX GRAPHIC REWIND
The index had a choppy day Wednesday as pulls from both sides vied for control of the dollar. The 6-day equity rally started to falter in the European session as investors mulled the recent moves higher in the euro and riskier assets. A further weight came early in the US session as retail sales slowed more than expected indicating that despite the recent rally in stocks the US recovery is still struggling to take hold. Later in the day the Fed released its much awaited minutes where investors mulled over dovish comments about the outlook for the US economy and jobs market. This gave the dollar a lift of its lows, that it had slumped to as the euro moved higher and stocks edged into positive territory ahead of the Fed minutes. The dollar continued to find bids going into the Asian session ahead of Chinese GDP data as regional markets fell anticipating a steep slowdown in Chinese growth. The data come in better than was feared, it did show that GDP and inflation are slowing but growth still remained robust, leading to a sell-off in the dollar.
Looking ahead, the dollar has maintained a relative bid tone as investors mull their next move in the euro and continue to digest the dovish Fed minutes. The Chinese data certainly will serve as a prop to risk appetite but this can also be construed to the negative side, to the effect that China's growth is slowing. Therefore, we expect to see fresh bid in the dollar today and going into the weekend as players begin to book profits in equities and higher-yielding FX.
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