Investing.com – The US dollar gave back some of the previous session’s gains on Thursday but remained near one-week highs after hawkish minutes from the Federal Reserve’s latest meeting suggested that US yields are still would remain high for some time.
At 04:20 ET (08:20 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% lower at 104.705, after rising from 0 overnight .3%.
Dollar Boosted by Aggressive Fed Minutes
The Fed’s meeting in late April showed policy makers growing concerned about persistent inflation, with some Fed officials talking about possibly raising rates further to reduce inflation.
“While the general view was that the policy was ‘well positioned’, many members were open to further increases if necessary. Moreover, ‘many’ participants wondered whether the policy was restrictive enough,” ING said in a note.
Several Fed officials subsequently warned about inflation levels in speeches after the meeting.
But the Fed is still not considered likely to raise rates further, so markets are now pricing in a greater chance that the central bank will keep rates high for longer.
The Atlanta Fed Chair will speak later in the session, and traders will look to his comments and May data for further clues.
Sterling maintains a firm tone following election news
In Europe, inflation rose 0.1% to 1.2730, with the pound maintaining its firm tone after Wednesday’s data showed British inflation fell less than expected in April.
Prime Minister Rishi Sunak called a national election, which is widely expected to see his Conservative party lose to the opposition Labor party after 14 years in power.
“The pound also appears to have been only very slightly affected by the news,” ING said, as “crucially, many of the volatility-causing events associated with British politics in recent years (trade relations between Britain and the EU, unfunded budget deficits) spending, the Scottish referendum) all now seem to be fairly marginal risks.”
traded 0.2% higher at 1.0839 after data showed euro zone business activity grew at the fastest pace in a year this month.
HCOB’s preliminary index rose to 52.3 this month from 51.7 in April, beating expectations for a more modest rise to 52.0, supported by buoyant demand for services, while the manufacturing sector showed signs of an impending recovery.
The European Central Bank has largely confirmed that it will begin its rate cutting cycle next month, and the current debate is how many further cuts policymakers will agree to this year.
Yen flat despite PMI improvement
In Asia, largely flat at 156.76, after rising from almost 157 in overnight trading, with data for Japan showing manufacturing activity increased for the first time in 11 months.
traded 0.1% higher at 7.2443, trading just below a six-month high.
Beijing was seen banning certain US companies from engaging in trade activities involving China, while also banning certain arms shipments to Taiwan. The move was seen as retaliation for higher US tariffs on key Chinese industries, which will come into effect from August 1.
China also conducted military exercises near Taiwanese territory, raising concerns about heightened tensions in the area.
