Dollar Defends Weekly Gains, Stocks Slide
18 August 2022
The USD has managed to defend this week's gains, with the EURUSD pair trading near 1.015, while Cable declined to the 1.20 level again. At the same time, USDJPY climbed above 135.
On the other hand, US equity indices declined slightly as the SP500 tagged the 200-day moving average near 4,300 USD and turned lower afterward.
FOMC minutes ignored by markets
The minutes from the FOMC meeting were publicly disclosed yesterday. Following the publication of the Federal Reserve document, which revealed that US officials had unanimously decided to raise rates by 75 basis points in July, there was a brief decline in the value of the dollar.
The minutes showed that officials expect the rate of increases to slow at some point. Additionally, it stated that a lot of Fed officials were concerned about the possibility of excessive tightening. The policy rate would also need to "stay for some time" at a "sufficiently restrictive" level in order to contain inflation, according to some members.
Since the minutes failed to bring any relevant surprises, investors rather ignored them, and the intraday trends in the markets were kept.
Chinese economy is expected to slow notably
In other news, Bloomberg reports that economists are becoming even more pessimistic about China's economic prospects, reducing their 2022 GDP projections and deviating significantly from the government's initial aim of roughly 5.5% for the year.
Nomura Holdings Inc. trimmed its expectation to 2.8% from 3.3%, while Goldman Sachs Group Inc. reduced its prediction for gross domestic product growth to 3% from 3.3%.
Nomura economists said, “China’s growth in the second half is likely to be significantly hampered by the Covid Zero policy, as well as a deteriorating property sector, local governments’ worsening fiscal conditions, and a likely slowdown in export growth.”
Later today, the revision of EU inflation data is due, although they are not expected to deviate from the first numbers released earlier in the month. The yearly inflation came out at 8.9%, the highest ever in the eurozone.
Isabel Schnabel, a member of the European Central Bank board, stated in an interview with Reuters on Thursday that the outlook for inflation in the Eurozone has not improved since its rate hike in July, indicating that she would vote in favor of another significant interest rate increase the following month.
Finally, investors will also pay attention to the usual Thursday's US jobless claims, along with the Philadelphia Fed Manufacturing Survey for August, expected to improve somewhat from 12.3 to -5. Existing home sales will also be released, seen falling from 5.12 million to 4.89 million in July.