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Weekly Roundup: US dollar slumps as American inflation cools

currency-newsWeekly Roundup: US dollar slumps as American inflation cools
A rise in risk appetite early in the week weighed on the safe-haven US dollar. Recent positive data from China and the US – the world’s two largest economies – cheered markets, thereby sapping USD’s strength.

The ‘greenback’ then plunged on Wednesday amid signs that American inflation may have peaked. Headline inflation eased from 9.1% to 8.5% year on year, while the month-on-month inflation reading was flat.

The following day, US producer prices unexpectedly fell 0.5% month over month in July. These signs of cooling inflation cheered global markets and dampened Fed rate rise bets – both of which weighed on USD.

The US dollar managed to stage a modest recovery at the end of the week, however. Fed officials were quick to reiterate their commitment to bringing down inflation, which helped limit losses.

In addition, a larger-than-expected improvement in US consumer sentiment helped boost the ‘greenback’.

So far this week the US dollar is on the rise as a slowdown in China’s economic recovery triggers some risk-off trade.

Looking ahead, USD investors may be focused on the Fed. The Federal Open Market Committee (FOMC) meeting minutes could cause some movement, particularly if they hint at further steep rate rises.

Meanwhile, markets will be carefully studying speeches from Fed officials to see if last week’s cooldown in inflation will cause them to reevaluate their positions.
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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