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Forex Today: the dollar is gaining strength amid gloomy sentiment at the start of the Fed’s week



Markets continued to run away from risk early on Monday, with investors remaining cautious amid fears of a likely global recession. Traders prefer to stay on the sidelines. The Fed is set to raise rates by 75 bps on Wednesday in response to strong inflation measures. Over the weekend, U.S. Treasury Secretary Janet Yellen warned of a slowdown in the U.S. economy, but said a recession was not imminent.

Concerns about slowing economic growth intensified after preliminary S&P Global PMI business activity indexes in the euro zone and Germany recorded declines in July. The S&P Global U.S. Services PMI dipped into contraction territory for the first time since June 2020.

China stepped up mass COVID-19 testing in Shanghai and Tianjin. This means there is a risk of new and costly lock-ins. A record number of Australians affected by COVID have been hospitalized. The number of people sickened by covid has skyrocketed, undermining investor confidence.

Meanwhile, China privately warned the Biden administration of the consequences should U.S. House Speaker Nancy Pelosi travel to Taiwan in August, the Financial Times (FT) reported Saturday. Citing sources, Reuters reported that Beijing plans to create a real estate fund worth up to $44 billion, despite looming problems with Evergrande’s restructuring.

Amid a flood of disappointing news in Asia, regional stock indexes are falling, partly echoing Friday’s sell-off on Wall Street. U.S. S&P 500 futures are down 0.22%, reflecting a dismal mood. Investors remain wary ahead of earnings releases from U.S. tech titans Google’s Alphabet Inc. and tech titan Apple Inc.

Among G10 currencies, the U.S. dollar is showing a modest comeback from more than two-week lows amid a flight from risk.

EUR/USD is trading near 1.0200, stalling the climb. ECB head Christine Lagarde said early on Saturday that the Bank will raise rates as much as necessary to bring inflation to our target level over the medium term. Meanwhile, ECB hawk Robert Holzmann noted that they will see what the economic situation is like in the fall. Then they can probably decide whether to raise the rate by another 0.5% or less. The IFO survey on Monday will shed more light on the euro zone’s economic outlook.

GBP/USD is falling towards 1.1950, failing once again to secure above 1.2000. Political uncertainty in the UK is offsetting expectations of a 50bp BOE rate hike in August. British Prime Ministerial candidate Liz Truss laid out her investment plans, while Rishi Sunak, another candidate, announced on Friday that he would put the government on a “crisis management” stance after taking office.

The USD/JPY pair regained ground above 136.00 as U.S. Treasury yields stabilized, pausing last week’s sell-off. The pair is ignoring news that the Bank of Japan (BOJ) is reshuffling its board members to bring in two new hawkish members.

Gold paused its recovery, gathering around $1,730, with all eyes on key U.S. data and the Fed’s event next week.

Bitcoin fell back below $22,000 amid concerns over Fed action, and Ethereum attacked the $1,500 mark, losing nearly 4.50% for the day. 


China stock market closed in the red amid protests in China



China stock market

The Chinese stock market chart closed in the red, recording its worst session in a month, as recent measures to ease monetary policy could not offset investor concerns about protests against tight covenant restrictions in the world’s second-largest economy.

China once again recorded record numbers of coronavirus infections on Monday following protests across the country against strict covid restrictions.

Amid concerns, investor sentiment on China’s stock market couldn’t be much affected by the People’s Bank of China, which said on Friday it will lower requirements on the amount of funds banks must hold as reserves for the second time this year, freeing up about 500 billion yuan ($69.8 billion) of long-term liquidity to support the slowing economy.

In turn, consumer and tourism-related stocks rose, as some investors bet that the recent COVID-19 outbreaks and social unrest could push China to end its “zero tolerance” COVID-19 policy earlier.

Earlier we reported that the gold price was showing moderate gains in reaction to the US Federal Reserve meeting minutes.

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Gold price today shows moderate growth, reacting to U.S. Federal Reserve meeting minutes



forex gold price

Gold prices today are rising, trading data show. Markets are processing the minutes of the November meeting of the U.S. Federal Reserve (Fed).

Forex gold price on the New York Comex rose $8.35, or 0.48%, to $1,753.95 a troy ounce. December silver futures rose 0.44% to $21.46 an ounce.

Investors pay attention to the minutes of the Federal Reserve meeting published this week. The document indicated that the regulator considers it expedient to slow down the rate of interest rate increases soon. According to the CME Group, 71.1% of analysts forecast a new 50 basis point hike in December after a 75-point increase in November.

The monetary policy easing is having a negative impact on the dollar. The dollar index (the exchange rate against a basket of currencies of six U.S. trading partners) is down nearly 1% for the week. The cheaper the U.S. currency, the more expensive gold becomes as it becomes more available for purchase in other currencies. The yellow metal has been showing a rise of about 1% since Monday.

Earlier we reported that the U.S. dollar is stable against the euro and yen and rising against the pound.

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The US dollar rate is stable against the euro and the yen and goes up against the pound



us dollar rate

In today’s trading the US dollar rate is stable against the euro and the yen and is strengthening against the pound. A day earlier, the dollar weakened against the world’s major currencies following the release of the Federal Reserve’s (Fed) November meeting minutes, which showed that the overwhelming majority of U.S. central bankers see the need to slow down the pace of rate hikes soon.

The ICE index that shows the dollar’s movement against six currencies (euro, Swiss franc, yen, Canadian dollar, pound and Swedish krona) lost 0.17% on Friday, while the broader WSJ Dollar Index was stable.

Current dollar rate

The euro/dollar pair was trading at $1.0411, up from $1.0410 at the close of the previous session. The dollar was trading at 138.61 yen against the Japanese yen at the same time, compared to 138.54 yen the previous day. The pound exchange rate fell to $1.2103, compared to $1.2113. Yesterday the dollar was 0.2% cheaper against the euro, 0.7% cheaper against the yen, and 0.5% cheaper against the pound.

“Some of the Fed leaders observed that monetary policy had reached a state in which it was sufficiently restrictive to meet FOMC goals and it would be appropriate to slow rate hikes. The vast majority of meeting participants felt that slowing the pace of the hike would probably be appropriate in the near term,” noted the minutes of the Nov. 1-2 Fed meeting.

Some of the U.S. central bank leaders, meanwhile, believed that the Fed would have to raise the rate higher than previously planned to meet its goal of easing inflation.

They indicated that the rate “would have to reach a somewhat higher level than previously expected,” given the lack of enough signals of easing in U.S. inflation at the moment, as well as the continuing imbalance of supply and demand in the economy.

Earlier we reported that Italian Enel plans to sell assets for 21 billion euros to reduce debt.

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