Dollar Weakens Ahead of Fed Minutes

And now the People’s Bank of China has joined the parade. However, the stronger dollar over the past year constitutes a headwind for net exports and a drag on growth.

Crude oil prices fell on Wednesday as oversupply weighed on markets, with OPEC not expected to announce a production cut at its meeting on Friday. The money supply peaked in 2011 and has been falling along with commodity prices. They traded at 1.98 percent, 1.79 percent and 2.46 percent, respectively.

The market is up in arms about this currency move.

I would say the same thing is happening at the Federal Reserve. “There’s no cause and effect here”, he said. Below are some of the highlights.

Conditions for a rate increase are “approaching” though not at hand, according to the minutes from the most recent Federal Reserve meeting. Having said that, why did China decide to devalue the renminbi?

Based on this economic data, the signal is clear. Sterling was steady at 1.5670 while the yen inched up to 124.28 to the dollar.

Another reason is domestic politics.

And then there’s global politics. “In this regard, the International Monetary Fund noted that the new mechanism for determining the central parity of the Renminbi announced by the central bank is a welcome step as it should allow market forces to have a greater role in determining the exchange rate”. “The fact that the currency now has more room to float just allows this to be expressed through a different channel”. And yet China gets singled out in the media! A first estimate of 2.3% growth in the second quarter is consistent with an ongoing moderate expansion of the U.S. economy, confirming that the first-quarter weakness was largely due to transitory factors. And it’s why you should invest in them today.

“Another uptick in the US Consumer Price Index may spark a sell-off in EUR/USD as market participants ramp up bets for a Fed rate hike at the September 17 interest rate decision, ” said David Song, currency analyst at DailyFX.

Oil continued its downward slide for a seventh straight week as concern about the global glut persists, and there appears little relief in sight.

Is this a sign of further reforms?

We expect that this is the beginning, not the end, to the weakness in the yuan.

This devaluation shows that the Chinese government does not agree with that line of argument.

‘DOING MUCH WORSE’ The big exception is, of course, China. There have been some very negative headlines.

A spike in U.S. and German debt yields reduced the appetite for riskier assets to keep Asian share markets subdued on Wednesday, while the euro held gains made on upbeat euro zone inflation data and on hopes that Greece will reach a deal with creditors. China is now embarking on the same path as other economies in the region. Few are calling for a U.S. recession in the near future.