Dollar tumbled in European trade against a basket of major rivals for the fourth straight session, plumbing four-week lows ahead of major US manufacturing data.

The Index

The dollar index fell 0.5% to 105.31, the lowest since July 5, after falling 0.3% on Friday, the third loss in a row on a large selloff. 

The index slid 0.7% last week, the second weekly loss in a row following the latest Fed's more bearish meeting, and after data on US recession.

The Fed

The Federal Reserve decided yesterday to hike rates by 75 basis points to 2.5%, the highest since December 2018 as expected.

Fed Chair Jerome Powell said the bank might slow down the pace of interest rate hikes, leading to a tumble in dollar and treasury yields.

He also said another big hike at the next meeting wouldn't be appropriate, but the decision will depend on economic data.

Recession

US economy shrank by 0.9% in the second quarter of 2022, the second such contraction in a row, while analysts expected a growth rate of 0.4%, after shrinking 1.6% in the first quarter.

Gold prices rose in European trade for the fourth straight session, hitting four-week highs as the dollar index fell against major rivals following the Fed's more bearish meeting. 

Gold was boosted by strong haven demand as the US economy fell in recession in the second quarter of the year. 

Gold prices rose 0.55% to $1,774.91 an ounce, the highest since July 5, after rising 0.6% on Friday, the third profit in a row. 

Gold rose 2.3% last week, the second weekly profit in a row, and the largest since late February. 

The Dollar

The dollar index fell 0.5% on Monday for the fourth session, plumbing three-week lows at 105.31 against major rivals. 

The decline came after the latest Fed's meeting, with chair Jerome Powell sounding bearish remarks and refusing to present future official forecasts.

Latest US data showed US economy contracted in the second quarter of the year by 0.9%, adding to a 1.6% contraction in the first quarter.

Estimates

Now analysts expect gold to benefit from the latest surge in haven demand as economies struggle to achieve proper growth under high interest rate and inflation conditions. 

The SPDR 

Gold holdings at the SPDR Gold Trust rose 0.58 tones on Friday to a total of 1,005 tones.

Euro rose in European trade against dollar for the fourth straight session, hitting two-week highs after surprising European data that showed resilience, in turn bolstering the case for a 50 basis points rate hike in Europe in September.  

Thee dollar sharpened its losses after the somewhat bearish Federal Reserve's policy meeting last week. 

EUR/USD rose 0.5% on Monday to 1.0270, the highest since July 21, after closing up 0.3% on Friday, the third profit in a row. 

Euro rose 0.1% against dollar last week, the second weekly profit in a row. 

Strong Data

Earlier European data showed the GDP grew 0.7% unexpectedly, while analysts expected a 0.2% growth rate. 

European inflation hit 8.9% in July, another record high, passing estimates of 8.7%. 

Such data showed resilience in European economy despite challenges from the Russian-Ukrainian war. 

The Dollar

The dollar index fell 0.5% on Monday for the fourth straight session, hitting four-week lows at 105.31 against major rivals. 

The decline came after the latest Fed's meeting, with chair Jerome Powell sounding bearish remarks and refusing to present future official forecasts. 

Latest US data showed US economy contracted in the second quarter of the year by 0.9%, adding to a 1.6% contraction in the first quarter. 

Oil futures fell nearly 1% in Asian trade as the dollar index backed off September 2002 highs, following earlier Chinese data and ahead of a batch of US data today.

As of 06:01 GMT, US crude futures due August fell 1.04%% to $97.45 a barrel, while Brent September futures fell 0.78% to $103.07 a barrel, as the dollar index slipped 0.05% to 105.82. 

From the US, the manufacturing PMI improved to 49 from 47.4 in June, missing estimates of 50.3, while the services PMI fell to 53.8 from 54.7, missing estimates of 53.9.

Both local and international demand on manufacturing goods in China are weak, thus leading to a contraction in the sector last month, with hope for a recovery in September with support from the government. 

Chinese exports are expected to be weaker as global demand suffers, with the US economy undergoing recession.

From the US, the services PMI is expected down at 52.3 in June from 52.7 in May, while construction spending is expected up 0.3%.

US President Joe Biden said that latest US quarterly recession isn't surprising as the Fed is trying to control inflation, however he asserted his government was on the right path.

The US administration's new inflation reducing low will impose a 15% tax on international companies, however no taxes will be raised on those earning $400 thousand and lower.

The Federal Reserve decided to hike rates by 75 basis points to 2.5%, the highest since December 2018 as expected.

Currently, two-year US treasury yields stand at 3.203%, while 10-year yields hit 2.954%, such divergence is usually indicative of upcoming recession.

It was confirmed last week that US President Joe Biden got a positive Covid 19 diagnosis, with light symptoms.

Medical officials in the US warned from a new Covid 19 wave in the US and worldwide, one that's particularly virulent, and asserting the pandemic isn't over yet.

Europe recently allowed several state-owned Russian oil companies to sell their products to several members of EU countries, however the US is seeking to put a limit on prices of Russian oil.

Baker Hughes data last week showed US oil rigs steadied at 605 rigs, the highest since March 2020, while rising in June for the 23rd month in a row.

US oil output on the other hand rose 200 thousand bpd last week to 12.1 million bpd, off April 2020 highs.