The US dollar fell to two-week lows against its major rivals yesterday after concerns over the US economy’s resilience sapped USD demand.
However the ‘greenback’ was quick to find its feet again in anticipation of the Federal Reserve’s latest interest rate decision, in which the US central bank was widely expected to announce plans to start tapering its pandemic-era asset purchases.
The Fed then delivered on Wednesday by announcing it would begin the tapering process from mid-November by reducing its $120bn bond-buying package by $15bn a month, with the aim of completing the process by summer 2022.
While the initial reaction to the tapering announcement by USD investors was fairly muted, the US dollar eventually started to catch some bids in the second half of the week.
However the ‘greenback’ then faltered again at the very end of the week, following the publication of an upbeat US payroll reading, which bolstered market sentiment at the expense of the US dollar.
Turning to this week’s session, it seems safe to assume the publication of the US consumer price index will act as a key catalyst of movement in the US dollar.
Economists are forecasting October’s CPI figures will report another sharp acceleration of inflation, with expectations headline price growth will have jumped from 5.4% to 5.8%, whilst core inflation will have climbed to 4.3%.
The sharp acceleration of inflation may bolster speculation the Fed could begin hiking interest rates before it finishes the tapering process, which would likely send USD exchange rates higher.
This week’s data calendar also includes the release of the University of Michigan’s consumer sentiment index, which could also prove USD positive if consumer morale improves as expected this month.
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)