USD strengthens before our eyes. Review for 17.08.2023

The major currency pair experienced a noticeable retreat on Thursday. The current EURUSD exchange rate stands at 1.0866.

These existing levels mark the lowest point in six weeks. The US dollar has valid reasons for strengthening: in the minutes of its latest meeting, published the day before, the Federal Reserve acknowledged the possibility of further rate increases.

This suggests that the Federal Reserve is mentally gearing up to continue its strategy of tightening monetary policy, driven by the significant risk of inflationary growth.

As for the European Central Bank's stance on rates, market opinions are divided. The latest reported data reflects a lack of positive momentum in the core prices of the eurozone for July. Isolated economic reports, particularly from Germany, signal subdued prospects. All these factors emphasise the divergence in opinions: will the ECB raise rates in the immediate future, or will it refrain from taking proactive measures? The European regulator itself does not provide clear indications. The next ECB meeting is scheduled for September.

Thus, the topic of interest rates has once again taken centre stage. The dollar thrives on these fluctuations and typically gains from such situations.