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Is China’s Devaluation good or bad for the U.S. Dollar?

Dear Traders,

The euro rallied as Greece reached an initial agreement with creditors on the terms of a third bailout. Euro-bulls were able to gain a nice profit until the current resistance around 1.1080.

The U.S. dollar got no major support from China’s Yuan devaluation.

While China’s move to devalue the currency by 1.9 percent raises doubts on the health of the world’s second-largest economy and generally leads to safe-haven flows into the U.S. dollar, the currency move could also pose a challenge for the Federal Reserve. One of the major concerns for the Fed is a strong U.S. dollar, which is holding inflation low. In a currency environment of an easier money path where other central banks are going to ease monetary policy in order to boost exports, it could be hard for the Fed to justify an interest rate hike this year. This fueled speculation the Fed’s actions could be pushed into 2016. With this in mind, the U.S. dollar could be vulnerable to further weakness in the near-term.

The British Pound traded sideways, accompanied by a slight downward tendency. The U.K. labor market report is due for release today at 8:30 GMT. Average Weekly Earnings are forecast to show a decline which could pose further downward momentum for the pound sterling.

The only piece of eurozone data today will be Industrial Production scheduled for release at 9:00 GMT.

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