Rate Hike Skepticism Weighs Down On U.S. Dollar

Markets worldwide absorbed information from the FOMC meeting minutes released yesterday, which revealed policymakers remain split on whether a rate increase is necessary in the near-term, citing uncertain inflation expectations as a primary concern.  Investors not surprisingly viewed the mixed opinions as a dovish signal, leading to a further drop in the US dollar against major currencies.  The US Dollar Index is now approaching its lowest level in three months.  The British pound has recorded the biggest gain against the dollar amongst major currencies, +0.8%, after U.K. Retail Sales data showed a bigger increase than expected.  Retails Sales comes as the latest of many recent statistics out of Britain that continue to run counter to the notion of a significant slowdown in the British economy post-Brexit.  Elsewhere, with the Yen still hovering around 100 per dollar, Japanese exports fell 14% year-over-year in July, matching the country’s largest drop in seven years.

Locally, US equity markets are fluctuating around even for the day following positive labor statistics and rising oil prices.  Weekly jobless claims were reported at 262k, down 4k from last week and slightly less than analyst expectations of 265k.  The figure marks 76 weeks straight that jobless claims were reported below the 300k mark – which is generally regarded as a strong labor market.  Additionally, WTI crude prices are rising for the sixth day in a row in response to the weakening dollar and the US crude supply reduction reported yesterday.  The six-day streak is the longest for WTI in more than a year, with it currently trading over $48 per barrel.             
 
All three major US stock indexes are currently up close to 0.25%, while Treasury yields and swap rates are down 1-3bp across curve.  WTI crude prices have climbed almost 3% on the day along with Brent crude up nearly 2%.