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On February 19th, Nick Timiraos, often referred to as the "Federal Reserve mouthpiece," wrote an article on the Fed meeting minutes, stating that sometimes what the Fed doesnt mention is more interesting. In every meeting last year (up to December), staff projected that inflation would return to 2% by 2027. In December, this projection was pushed back to 2028. However, the January meeting minutes did not specify a concrete timeframe for when inflation would reach 2%. Instead, the minutes indicated that the projected figure was "slightly higher, but balanced" compared to the December projection, and that inflation was expected to return to its "previous downward trend" as the impact of tariffs was expected to end by mid-year. However, the key phrase from the December minutes ("and to reach 2% by 2028") was absent from the January minutes.February 19th - Today (February 19th) is the third day of the Lunar New Year, the fifth day of the Spring Festival holiday. The national railway system is expected to transport 13.4 million passengers today, with 747 additional passenger trains planned. Regarding ticket sales, tickets for March 5th (the seventeenth day of the first lunar month) went on sale today.The yield on Japans 20-year government bonds rose 1 basis point to 2.98%.1. All three major U.S. stock indexes closed higher. The Dow Jones Industrial Average rose 0.26% to 49,662.66 points, the S&P 500 rose 0.56% to 6,881.31 points, and the Nasdaq Composite rose 0.78% to 22,753.63 points. Goldman Sachs and Salesforce rose nearly 2%, leading the Dow Jones. The Wind U.S. Tech Big Seven Index rose 0.77%, Amazon rose nearly 2%, and Nvidia rose more than 1%. The Nasdaq China Golden Dragon Index fell 0.04%, Canadian Solar rose nearly 4%, and 21Vianet fell more than 9%. 2. All three major European stock indexes closed higher. The German DAX rose 1.12% to 25,278.21 points, the French CAC40 rose 0.81% to 8,429.03 points, and the UK FTSE 100 rose 1.23% to 10,686.18 points. 3. The WTI crude oil futures contract closed up 4.3% at $64.94 per barrel; the Brent crude oil futures contract rose 4.15% to $70.22 per barrel. 4. International precious metals futures generally closed higher, with COMEX gold futures rising 1.84% to $4996.10 per ounce and COMEX silver futures rising 4.88% to $77.13 per ounce.In January, the RMB accounted for 3.13% of global payments via SWIFT, up from 2.73% in the previous month.

Investor attention is on the Fed's minutes as recession fears drive the US Dollar Index towards 107.00

Daniel Rogers

Aug 16, 2022 11:47

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The US Dollar Index (DXY) rises for a third day in a row during Tuesday's Asian session, gaining bids to 106.58. Thus, the greenback's signal captures the market's rush for risk-free assets in response to worries about the US and China's economies as well as worries about geopolitics in the Middle East, China, and Russia. It is noteworthy that aggressive Fed remarks and weaker US data enhance market trepidation and help DXY bulls.

 

Despite this, the DXY bulls closely monitor the gloomy statistics coming out of China and the US, particularly in light of the recession fears.

 

In August, the US NY Empire State Manufacturing Index fell from 11.1 in July to 31.3, below market estimates of 8.5. The August NAHB homebuilder confidence index in the US fell from 55 to 49, the lowest level since the start of 2020.

 

In other news, China's retail sales slowed in July to 2.7% YoY from 3.1% earlier and 5.0% forecast, while industrial production (IP) fell to 3.8% from 3.8% previously and 4.0% market estimates. Additionally, in an effort to counter bearishness, the People's Bank of China (PBOC) shocked the markets on Monday by reducing the rates on its medium-term lending facility (MLF) by 10 basis points (bps).

 

It should be emphasized that news stories about deteriorating coronavirus conditions in Shanghai, China's financial center, and the restart of Russian bond trading on Wall Street did not spur investors' desire to take risks. The Wall Street Journal's (WSJ) rumors of a potential meeting between US Vice President Joe Biden and his Chinese counterpart Xi Jinping may also encourage investors to take more risks. In a similar vein, Chinese President Xi proposed new efforts to revive the second-largest economy in the world.

 

The Pentagon said on Monday that the US, South Korea, and Japan took part in a missile warning and ballistic missile search and tracking exercise last week off the coast of Hawaii. Between August 22 and September 1, the US and South Korea will collaborate on military drills. The DXY rises as a result of the additional stress that geopolitical worries place on market sentiment.

 

The three-day downtrend in US 10-year Treasury yields is around 2.775%, while S&P 500 Futures are down at least 0.13 percent day-to-day.

 

Moving on, the secondary US housing and activity data released today should be of interest to DXY traders ahead of the release of the FOMC Minutes on Wednesday. The dollar's gauge might remain on the bear's radar if US data keep getting worse.

 

The three-week-old resistance line, which is now support at 106.35, would need to be broken for an extended period of time for DXY bulls to hit the monthly high above 107.00. However, in order to approach July's yearly high close to 109, the bulls need confirmation from late July's peak at 107.45.


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