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Weekly roundup: US dollar bolstered by risk-off trade

currency-newsWeekly roundup: US dollar bolstered by risk-off trade
The US dollar trended broadly higher last week, as skittish investors favoured the safe-haven currency.

After initially struggling to find support at the start of the week amidst a lack of notable data, the ‘greenback’ began to make its ascent following the release of the latest US retail sales figures, which reported a strong-than-expected improvement in sales growth in October.

Some mixed commentary from Federal Reserve policymakers then tempered the upside in the US dollar in mid-week trade, before USD exchange rates accelerated again in the latter half of the session as market sentiment soured.

This was initially driven by contagion fears. after the Central Bank of the Republic of Turkey’s (CBRT) decision to cut interest rates triggered a collapse of the Turkish Lira (TRY) on Thursday.

Risk appetite then weakened further at the end of the week as Austria announced it would be reimposing lockdown measures, with investors fearing that some of its neighbours may need to take similar steps amidst a dramatic resurgence of Covid cases in Europe.

So far this week, the US dollar has already gotten off to a strong start, after Jerome Powell was nominated for a second four-year term as chair of the Fed.

The Fed will remain in the spotlight with the publication of the minutes from the bank’s November policy meeting. 

Markets will be focused on the Federal Open Market Committee’s (FOMC) language regarding future monetary tightening, with USD investors looking for any sign that some members may be open to an early interest rate hike.

Any rate hike signals could be supported by the release of the Fed’s preferred indicator for inflation, the PCE price index, which is expected to have accelerated rapidly in October.
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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