Dollar at 9-mth highs as Fed hints at tapering

On Thursday, the USD pushed sharply higher as yesterday’s FOMC minutes showed a hawkish surprise, supporting the greenback and tanking equities. 

The minutes of the July Federal Reserve meeting were released on Wednesday. They showed the Fed officials saw the potential to taper the QE program later this year if the economy continues to improve as expected. However, the condition of “substantial further progress” toward maximum employment had not yet been met.

Investors now expect Jay Powell to officially announce plans to taper the Quantitative Easing at the Jackson Hole symposium next week. 

The markets’ immediate reaction was a risk-off wave – the USD rose strongly, sending the EURUSD below April lows to 1.1680 (November 2020 levels), while commodity currencies got crushed even more notably. 

Stocks also collapsed as bulls believed the Fed would not announce the taper decision anytime soon. Precious metals dipped, but losses were limited, given the large declines a week ago. Bond yields also failed to move higher, and the 10-year yield was seen around 1.25% today.

Later in the session, the Philly Fed manufacturing survey is seen improving to 23 from 21.9 previously, while US jobless claims will also take some attention. 

From other news, it looks like oil has ended its medium-term uptrend as the commodity dropped below the key support of 65 USD, hitting stop losses and diving toward the 63 USD level. As a result, the double bottom pattern was invalidated. 

Source: https://www.axiory.com/market-news/dollar-at-9-mth-highs-as-fed-hints-at-tapering