The US dollar put in a strong performance in post-July 4th trading ahead of key data releases tomorrow and Friday and as traders eagerly expected the minutes from the latest Fed meeting.
Euro/dollar dropped to as low as 1.1311 during Wednesday’s European trading while dollar/yen rose to as high as 113.67 in a broad move higher for the greenback. The dollar index reached a 1-week high of 96.23 and thereby recovered some of the losses it suffered the previous week. Buying of the dollar was in anticipation of strong data to come later in the week and particularly the June employment report.
In economic news, US factory orders for May disappointed by dropping 0.8% month-on-month instead of the 0.5% fall expected by analysts. The previous month’s contraction was revised down to -0.3% from -0.2% initially reported.
Earlier in the day, there was a flurry of European services purchasing managers indices (PMIs). The final June services number for the Eurozone was revised higher to 55.4 from the preliminary 54.7 print. In the UK, the services PMI came in at 53.4; close to the forecast of 53.5 made by analysts but down from the previous month’s 53.8 figure. Pound/dollar briefly dipped below 1.29 to 1.2892 but managed to climb above that level later and was last trading at 1.2913.
In commodities, oil dropped sharply to below $46 a barrel at $45.60, from above $47 during the previous day’s trading. News that Russia did not favor even more production cuts to support the price seemed to weigh on the commodity. The release of US energy inventories was delayed by a day due to the 4th of July holiday and will take place on Thursday. Gold traded as low as $1217 an ounce, which was a fresh 1 ½ month low. Gold was last at $1221.
Looking ahead, forex traders will be eagerly expecting the minutes from the June 13/14 Fed meeting, when the benchmark target rate was hiked by 0.25% to 1-1.25%. The minutes are expected to show how the discussion inside the committee went, as well as maybe reveal some of the deliberations that concern the details of the plan to gradually the Fed’s huge balance sheet.
