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US dollar rallies on hawkish Fed

currency-newsUS dollar rallies on hawkish Fed
The US dollar rebounded on Friday as USD investors seized on some hawkish comments from Federal Reserve Chair Jerome Powell.

Meanwhile, the pound is mostly rangebound at the start of this week, with GBP/EUR is muted at €1.1622 and GBP/USD flat at $1.2229. GBP/CAD is stable at C$1.5899, while GBP/AUD and GBP/NZD retreat to AU$1.7533 and NZ$1.9286, respectively.

Looking ahead, will a thin data calendar help to limit currency volatility at the start of this week?

What’s been happening?

The US dollar rallied at the end of last week, recouping a good portion of Thursday's losses amidst aggressive Federal Reserve rate hike bets.

The ‘greenback’ strengthened in the wake of comments from Fed Chair Jerome Powell. Powell said the Fed is ‘acutely focused’ on returning inflation to the bank’s 2% goal, sparking speculation that the US central bank could maintain the current pace of its tightening cycle or even accelerate it.

This uptick in the US dollar tempered demand for the euro as a result of the strong negative correlation between the pairing, with the single currency only finding modest gains as Eurozone inflation was confirmed to have climbed to a record high last month.

Finally, the pound ended last week on the back foot, relinquishing some of Thursday’s gains in response to some dovish comments from Bank of England (BoE) Chief Economist Huw Pill.

What’s coming up?

Turning to the start of this week, a lull in impactful data at the start of the session could limit currency movements.

Looking a little further ahead, its likely we will see the UK’s consumer price index act as a key catalyst for the pound. Will another spike in UK inflation stoke cost-of-living concerns and push Sterling lower this week?

For EUR investors the primary focus is likely to be the Eurozone’s latest PMI figures. Will another robust expansion of private sector activity in the bloc help to bolster the single currency on Thursday?

In the meantime, however elevated tensions between Russia and the EU could put a dampener on the euro through the first half of the week.

Across the pond, we may see the US dollar strengthen if global recession fears prompt another equity sell off.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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