Dollar firming up on a hawkish Fed view
The dollar firmed up on Thursday as investors digested the latest Federal Reserve policy meeting minutes, which reinforced expectations for a rate increase this month.
The minutes showed that a majority of policymakers believe that further rate hikes are needed to curb inflation, even though they acknowledged that such tightening could slow economic growth.
This hawkish tone from the Fed helped to boost the dollar against a basket of other currencies. The dollar index, which measures the greenback against a basket of six major currencies, rose to its highest level in over three weeks.
The dollar’s gains were also supported by weaker economic data out of the United States. Factory orders slowed more than expected in May, while manufacturing activity contracted in June.
These data suggest that the US economy may be starting to slow down, which could give the Fed more room to tighten monetary policy without risking a recession.
However, some analysts warned that the dollar’s gains could be limited if the Fed does not raise rates as much as expected.
“The dollar is likely to remain under pressure if the Fed does not deliver a more hawkish message at its July meeting,” said analysts at ING Bank.
Overall, the dollar is likely to remain volatile in the near term as investors assess the outlook for US monetary policy and the global economy.
- he release of US employment data on Friday.
- The outcome of the European Central Bank’s policy meeting on Thursday.
- The direction of global equity markets.
Investors will be closely watching these factors to see how they could impact the dollar’s value in the near term.