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Weekly Roundup: US dollar rocked by mixed response to Fed rate hike

currency-newsWeekly Roundup: US dollar rocked by mixed response to Fed rate hike
The US dollar struggled for direction at the start of last week, with USD investors reluctant to make any bullish bets ahead of the Federal Reserve’s latest interest rate decision.

The ‘greenback’s slow start to the session was compounded by a fall in US Treasury yields, which offset a stronger-than-expected uptick in US factory orders in March.

USD exchange rates then initially tumbled in response to the Fed’s latest interest rate decision, despite the US central bank raising interest rates by 50bps.

The slump appeared to be driven by some USD bulls who were disappointed as Fed Chair Jerome Powell ruled out a 75bps hike in June and July.

However, these losses were quickly reversed on Thursday as markets had more time to digest the Fed’s forward guidance, with the US dollar also catching some safe-haven bids amidst a slump in equity markets.

The ‘greenback’ then closed the week mostly rangebound as the latest US payrolls figures made for some mixed reading. While the US economy added more jobs than expected last month, unemployment didn’t fall as forecast.

Turning to this week’s session, the primary focus for USD investors will be on the US consumer price index. Signs that US inflation may have peaked could dampen demand for the US dollar as it could see investors reprice their Fed rate hike expectations.

On the other hand so long as the current risk-off mood persists, the ‘greenback’ is likely to be underpinned by safe-haven demand.

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