G7 currencies rise on a weaker dollar ahead of the ECB policy accounts

Due to thin holiday trading, the DXY has remained on the back foot since early Thursday and continues to drift lower. Against a backdrop of disappointing macroeconomic data releases and the dovish tone seen in the FOMC Minutes on Wednesday, the US Dollar suffered heavy losses on Wednesday, with the US Dollar Index losing nearly 1% against its rivals. The US stock market and the bond market will be closed on Thursday, November 24, in observance of the Thanksgiving Day holiday. Investors are expecting a mixed start to the European stock market Thursday morning, as investors await the minutes of the ECB's November meeting and the German IFO survey to get a sense of what the market will entail.

FX markets

EUR/USD was able to capitalize on the general selling pressure surrounding the US Dollar today and surged above 1.0400 for a fresh weekly high. The pair may edge higher in the remaining sessions toward 1.0450.

There was a significant gain of nearly 200 pips for the GBP/USD pair on Wednesday and buyers are hopeful of holding the ground above the 1.20 hurdle. The pair was last seen trading at its highest level since mid-August near 1.2100.

USD/JPY fell sharply for a second straight day on Wednesday and all the gains it had made over the past week were erased. There is a reasonable chance that the pair will push lower and fluctuate below 139.00 in the near future.

As US Treasury bond yields fell on Wednesday, gold prices rose and closed above $1,750 for the first time in a couple of days. At the beginning of European morning, XAU/USD edged higher toward $1,760.

Stock markets

Additionally, European investors reacted to Wednesday's flash PMI (purchasing managers' index) readings from the eurozone, which confirmed that the 19-member currency bloc has entered recession, but noted that the downturn in the economy has moderated slightly since late October. Markets in Asia-Pacific traded higher overnight, reacting positively to the Fed's remarks that smaller rate hikes will start "soon." U.S. stocks closed higher Wednesday after a choppy session earlier in the week.

Fed's meeting minutes

In the minutes of the Fed's November meeting, the central bank indicated that it is making progress in its fight against high inflation. Through the end of this year and into 2023, the Fed expects to slow the pace of rate hikes. As the news came out following the eagerly awaited Fed minutes it was evident that officials were generally satisfied that small steps could be taken to move the economy forward. There is an almost certain likelihood that the FOMC will slow the pace of tightening from December. According to the minutes from the meeting, a large majority of participants thought that a slowing down in the pace of the rate hike would be appropriate within a reasonable amount of time. It was also evident from the minutes that there is an emerging debate within the Fed about the risks that rapid policy tightening could pose to economic growth and financial stability. In the meantime, policymakers acknowledged that there had only been modest improvements demonstrated in the inflation rate as a result of the Fed's action.

U.S. consumer price data that was slightly cooler than expected has raised hopes of a more moderate pace of rate hikes. It is because of these hopes that the dollar index declined 5.1% in November, putting it on track for its weakest monthly performance in 12 years. According to the latest data released on Wednesday, U.S. business activity contracted for a fifth consecutive month in November. This was despite new orders dropping to their lowest level in almost two and a half years as higher interest rates slowed demand.