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- US Dollar retreats as focus shifts to housing data, Fed minutes
US Dollar retreats as focus shifts to housing data, Fed minutes
- The US Dollar came under modest selling pressure on Wednesday.
- The US Dollar Index stabilizes above 103.00 following a four-day winning streak.
- US housing data will be watched closely by market participants.
The US Dollar lost some strength on Wednesday after starting the week on a bullish note. The USD Index – which tracks the USD's valuation against a basket of six major currencies – retreated toward 103.00 from the one-month high it set near 103.50 on Monday.
The USD benefited from the upbeat July Retail Sales data released on Tuesday, but failed to extend its rally. After Fitch Ratings analysts told CNBC that they could downgrade several big lenders, including J.P. Morgan, the benchmark 10-year US Treasury bond yield declined sharply, limiting the USD's potential gains.
The US economic docket will feature Housing Starts and Building Permits data for July in the early American session on Wednesday. The Federal Reserve will release Industrial Production figures and publish the minutes of the July policy meeting later in the day.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies. The US Dollar was the weakest against the Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.14% | -0.33% | 0.04% | 0.00% | -0.01% | -0.17% | 0.00% | |
| EUR | 0.15% | -0.18% | 0.17% | 0.14% | 0.14% | -0.02% | 0.15% | |
| GBP | 0.33% | 0.18% | 0.37% | 0.33% | 0.31% | 0.16% | 0.32% | |
| CAD | -0.04% | -0.16% | -0.36% | -0.02% | -0.02% | -0.19% | -0.02% | |
| AUD | -0.01% | -0.13% | -0.33% | 0.01% | -0.02% | -0.16% | -0.01% | |
| JPY | 0.02% | -0.17% | -0.35% | 0.02% | 0.01% | -0.20% | 0.00% | |
| NZD | 0.17% | 0.02% | -0.16% | 0.19% | 0.17% | 0.17% | 0.17% | |
| CHF | 0.00% | -0.15% | -0.34% | 0.02% | -0.01% | 0.00% | -0.17% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Daily digest market movers: US Dollar awaits US data
- Retail Sales in the US rose 0.7% on a monthly basis in July to $696.4 billion, data published by the US Census Bureau showed Tuesday. This reading followed the 0.3% (revised from 0.2%) increase recorded in June and came in better than the market expectation of 0.4%. Retail Sales Control Group increased 1% in the same period.
- Other data from the US showed that the headline General Business Conditions Index of the Federal Reserve Bank of New York's Empire State Manufacturing survey slumped to -19 in August from 1.1 in July.
- Wall Street's main indexes suffered heavy losses on Tuesday. The financial-heavy Dow Jones Industrial Average fell more than 1%, while the S&P 500 Financial Index lost nearly 2%.
- Early Wednesday, US stock index futures trade modestly higher on the day.
- Minneapolis Federal Reserve President Neel Kashkari said on Tuesday that he is feeling good about the progress on inflation but added that it was still too high. "The question is, have we done enough, or do we need to do more," he added, noting that fed policy makers have been surprised by the economy's resilience.
- In a report published earlier in the week, Goldman Sachs said that they expect the Federal Reserve to start lowering the policy rate in the second quarter of 2024.
- According to the CME Group FedWatch Tool, markets are pricing in a nearly 30% probability of one more 25 basis point (bps) Fed rate hike before the end of the year.
- The US Department of Labor will publish the weekly Initial Jobless Claims data on Thursday.
Technical Analysis: US Dollar Index is yet to clear critical resistance
The US Dollar Index (DXY) peaked above the 200-day Simple Moving Average (SMA) – currently located at 103.30 – on Monday but failed to make a daily close there. Meanwhile, the Relative Strength Index (RSI) indicator on the daily chart holds comfortably above 50, suggesting that the latest pullback is a technical correction rather than the beginning of a reversal.
In case DXY flips 103.30 into support, it could target 104.00 (psychological level) and 104.70 (May 31 high) next. On the downside, strong support seems to have formed at 102.30, where the 100-day and the 50- day SMA meet. A daily close below that level could attract sellers and open the door for an extended leg lower toward 102.00 (psychological level, static level) and 101.40 (static level).
US Dollar FAQs
What is the US Dollar?
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022.
Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
How do the decisions of the Federal Reserve impact the US Dollar?
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates.
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.
What is Quantitative Easing and how does it influence the US Dollar?
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
What is Quantitative Tightening and how does it influence the US Dollar?
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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