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U.S. Dollar Rallies To New Highs Amid Rush To Safe-Haven Assets

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·2-min read
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Key Insights

  • The U.S. Dollar Index moved to new highs as EUR/USD declined to 20-year lows. 

  • Economic reports from the U.S. indicate that the economy remains in a decent shape. 

  • The release of the FOMC Minutes can move markets today. 

Euro And British Pound Remain Under Strong Pressure

The U.S. Dollar Index tested new highs today as traders were focused on buying safe-haven assets.

EUR/USD declined below the 1.0200 level amid worries about high energy prices, which can push the European economy into a recession.

Meanwhile, GBP/USD dropped to 1.2000 amid a political crisis in the UK. Several top ministers have left Boris Johnson’s government, while some members of his own party asked him to resign.

Not surprisingly, traders increased purchases of the safe-haven U.S. dollar, which has recently gained strong upside momentum. The U.S. Dollar Index, which measures the strength of the U.S. dollar against a broad basket of currencies, is currently trying to settle above 107. These levels were last seen back in December 2022.

Traders Will Focus On FOMC Minutes

The U.S. has recently released ISM Non-Manufacturing PMI report for June. The report indicated that ISM Non-Manufacturing PMI declined from 55.9 in May to 55.3 in June, compared to analyst consensus of 54.3. The better-than-expected report highlighted the strength of the U.S. economy and provided additional support to the American currency.

Traders also had a chance to take a look at JOLT’s Job Openings report for May. The report showed that the number of job openings in the U.S. declined from 11.68 million in April to 11.25 million in May. While the number of job openings has started to decline, it remains at high levels.

Today, traders will also focus on FOMC Minutes. The Fed is expected to increase the target rate from the current 150 – 175 bps to 225 – 250 bps. If the FOMC Minutes indicate that the Fed will raise the interest rate by 75 bps, the impact on currency dynamics will be minimal as such a move is already priced in by the markets. However, any indication of a more aggressive rate hike will push the U.S. dollar to new highs.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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