The Dollar Index (DXY) moved up to 106.430 after finishing yesterday fairly intact. The US Dollar had weakened the previous week as a result of lower-than-anticipated US inflation estimates as speculators reduced their bets for a significant rate increase in the coming month. However, considering that inflation is still anchored close to 4-decade highs, the index has essentially made up the territorial losses as several Fed policymakers have hinted at more substantial interest rates in 2022.
Traders are waiting for confirmation that the Federal Reserve will announce a rise in interest rates of 75 bps in the next month, mirroring the rise in July, as the markets remain cautious of any additional hawkish rhetoric in the minutes.
It will be interesting to see the retail sales statistics for last month in the US, which will be released today, as buyers are likely to reduce discretionary spending in light of the fact that inflation remains quite high.
When the Reserve Bank of New Zealand raised rates by an anticipated 50 bps and emphasized the importance of moving up the timing of future rate hikes, the NZD/USD slipped 0.1% to 0.6339 in other trading sessions.
While Australian wages increased annually by 2.6% in the most recent quarter, significantly behind the 6.1% headline inflation rate, which supported the central bank’s decision to provide itself additional interest rate discretion, the AUD/USD plummeted to 0.6995, thus losing 0.4%.
GBP/USD increased 0.1% following a 0.6% increase in UK consumer prices from two months prior, bringing the annualized inflation rate to 10.1%.
Prior to the announcement of the final numbers of the Eurozone’s Q2 GDP later on Wednesday, EUR/USD fell 0.1%. The prelim figures indicate higher growth than anticipated before the anticipated downturn thus far in 2022.
The prognosis for the economy of the Eurozone has suddenly grown gloomier, and a downturn now seems likely. The European Central Bank (ECB) will need to boost its reputation as an inflation combatant and keep raising rates regardless of the dimming prospects.