Title: US Dollar Retreats in European Trading, Fed Meeting Points Towards Rate Hike
As of early European trading on Thursday, the US dollar has experienced a slight decline following overnight gains spurred by the latest Federal Reserve meeting. At 02:55 ET (0655 GMT), the Dollar Index, which measures the dollar against six other major currencies, was down 0.1% at 102.945, after a 0.5% increase overnight.
The release of the Fed minutes on Wednesday revealed that almost all members of the central bank support further rate hikes in the coming months, attributing their decision to a strong and overheated labor market. This has raised expectations for a possible rate hike at the Fed’s next meeting later this month, providing a boost to the US dollar.
“We see room for a dollar rebound in the near term. The US economy appears to be in better shape than Europe and Asia, suggesting that ‘higher longer’ is somewhat more credible coming from the Fed than most others,” stated Jonas Goltermann, an economist at Capital Economics.
In other news, German factory orders demonstrated positive growth, rising 0.1% to 1.0865. This came as a result of May’s data, which showed an impressive 6.4% increase compared to the previous month, outperforming the expected 1.2% rise. The positive data has further increased expectations that the European Central Bank will raise interest rates later this month, according to Joachim Nagel, a member of the Governing Council. However, final decisions will depend on future data.
On the yuan front, the Chinese currency remained virtually unchanged, trading at 7.2472 and hovering near its lowest level in eight months. This was a response to recent data indicating that Chinese business activity has deteriorated for the third consecutive month in June. Additionally, concerns about worsening trade relations between the United States and China, particularly in the field of semiconductor chips, have contributed to the pressure on the yuan.
In international currency markets, the euro remained flat at 1.2704, while the Japanese yen fell 0.6% to 143.76 amidst speculation of government intervention in currency markets. Meanwhile, the British pound showed resilience with a 0.4% increase to 0.6678, supported by better-than-expected trade data from May.