Dollar Firms Against Most, But Euro And Yen Hold Own

The US dollar is trading higher against the dollar-bloc, encouraged by the continued decline in commodity prices and energy.  Sterling has been knocked down by some disappointment with retail sales when petrol is included.  The greenback is making new highs against several emerging market currencies, including South African rand, Turkish lira and Mexican peso and Malaysian ringgit 

The euro, on the other hand, has extended yesterday’s recovery off the $1.1020 low.  Many are now looking at the July and August high in the $1.1215 area as the next target.   The dollar is flattish against the yen.   Its recovery in Asia was stopped cold in early Europe where the five and 20-day averages convergence–JPY124.15-JPY124.20. 

Perhaps the markets are always a bit of a Rorschach test, but this seems especially the case presently.  The FOMC minutes were roughly 22 pages long.  Market participants had to react to the headlines as provided by news services, and yesterday’s embargo was violated, leading to a confusing and early release.  The headlines by their very nature take comments out of context and rely on a journalist judgment.  A closer reading of the minutes suggest a more balanced view that the dovish spit of the initial headlines.   

For example, some headlines played up that “several participants noted that a material slowdown in Chinese economic activity could pose risks to the US economic outlook.”  Just before that the minutes noted that “…the recent Chinese stock market decline had limited implications to date for the growth outlook in China”.  

Similarly, the headlines seemed to emphasize that “some participants expected the view that the incoming information has not yet provided grounds for reasonable confidence that inflation would move back to 2% over the medium term…”  The following paragraph began with “Some participants, however, emphasized…the significant progress over the past few years and viewed the economic conditions for beginning to increase the target range for the federal funds as having been met or were confident they would be met shortly.”

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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