The dollar index (DXY) increased by 0.88% to reach a two-month high on Wednesday, driven by stronger-than-expected US economic data, including a July ADP employment change of +104,000—significantly above the anticipated +76,000—and a Q2 GDP growth of +3.0% compared to the expected +2.6%. This bolstered the dollar amidst hawkish comments from Fed Chair Powell regarding labor market strength and the necessity of a moderately restrictive monetary policy due to inflation risks.
In addition, the FOMC maintained the federal funds target rate at 4.25%-4.50%, with a historic dissent from two Fed governors advocating for a rate cut. The dollar strength impacted the Euro, driving it down by 1.10% to a seven-week low, while the USD/JPY rose by 0.61% as the yen weakened against the dollar. Precious metals fell sharply, with August gold down 0.85% and September silver down 1.43%, attributed to dollar strength and rising T-note yields.
