The Dollar Index came close to a correction on Wednesday, hitting its annual lows for part of the session (with a new low at 100.24), but then the tide turned and sellers were severely caught out by a +0.7% funicular rise to around 101.00.
The euro, which had ventured as high as 1.1214 (an all-time high), ended the day down -0.5% at 1.1125.
The yen fell back -1.15% to 144.85, the pound -0.7% to 1.3317 and the Swiss franc -0.9% to 0.8508.
The Yen and Swiss Franc were the weakest currencies, with the Euro recovering 0.4% against the Swiss currency.

Why is the Dollar recovering like this?

The answer is not to be found in the 'figures of the day': sales of new homes in the USA contracted by 4.7% in August, according to the Commerce Department (after a somewhat 'bizarre' jump of +10.4% in July), to 716,000 annualized and seasonally adjusted.

The median price of new homes sold was $420,600, and their average price was $492.700: these are new absolute records linked to the shortage of homes for sale (nobody would trade a loan at 4% for a new loan at 6.20%, national average as at 24/09/2024).
At 467,000, the stock of new homes ready for sale represents a 7.8-month supply at the current rate of flow.

Nor is it clear that it has benefited from the OECD's revised forecasts for 2024 and 2025: growth in Europe is expected to be 0.7% in 2024, but will recover by only 1.3% in 2025, compared with +1.5% previously.

In the United States, GDP growth is set to slow, but to benefit from the easing of monetary policy now underway, with growth expected to reach 2.6% in 2024, then 1.6% in 2025 (instead of +1.8%).

In China, growth is set to dip to 4.9% this year, then plateau at 4.5% in 2025, as stimulus measures fail to offset sluggish consumer demand and the massive correction in the property market.
The Yuan, which had not reacted spectacularly to the PBOC's stimulus plan (+0.3% to 7.0300/$), stabilized at around 7.0300 (or 0.1420).
This stability contrasts with the boom in Chinese stock market indices.

On Friday, Forex traders will be keeping a close eye on the publication of the US Consumer Price Index (CPI), the Fed's preferred gauge of inflation.

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