The dollar index (DXY) fell by 0.04% on Wednesday amid a recovery in the euro and yen. The euro rose ahead of the European Central Bank (ECB) meeting and the yen slightly recovered from a 39-year low following the Bank of Japan’s (BOJ) potential for faster interest rate hikes. Meanwhile, WTI crude oil prices surged by 2% to a six-week high, impacting inflation expectations and the dollar. Concerns over escalating conflicts in the Middle East continued to drive safe-haven demand for the dollar.
In related developments, U.S. military operations against Iran persisted, with the U.S. conducting attacks for the 11th consecutive day aimed at reducing threats to commercial shipping, while Iran retaliated against U.S. bases in Bahrain, Kuwait, and Jordan. The swaps market is currently pricing in a 34% chance of a 25 basis point rate hike at the next Federal Open Market Committee (FOMC) meeting on July 28-29.
Japanese exports increased by 19.3% year-over-year in June, surpassing expectations, while imports rose by 25.4% year-over-year. The likelihood of intervention in the currency markets remains high as the yen stays above 160 per dollar. On the metals front, gold and silver prices rose sharply, supported by a weaker dollar and safe-haven demand following the Houthi rebels’ maritime blockade threats against Saudi Arabia.
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