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Weekly Roundup: US dollar dented by bullish market mood

currency-newsWeekly Roundup: US dollar dented by bullish market mood
The US dollar trended broadly lower through the first half of last week as demand for the safe-haven currency was undermined by a prevailing risk-on mood.

This was of course linked to the optimism which surrounded the latest round of peace talks between Ukrainian and Russian officials in Turkey, with markets welcoming reports of ‘constructive’ progress.

The USD selling bias remained in place in mid-week trade as GBP investors were left disappointed by the latest US GDP release, with the finalised figures from Q4 2021 revising growth down from 7.1% to 6.9%.

However, the US dollar was then able to mount a recovery in the second half of the week as the market mood began to sour again as analysts suggested that Vladimir Putin may have ulterior motives for wanting to pull his troops back from Kyiv.

This uptick in USD exchange rates was underpinned by another uptick in the Federal Reserve’s preferred indicator of inflation, the PCE price index, as well as an upbeat US jobs report.

While March’s payrolls figures came in slightly below expectations, the US unemployment rate fell faster than forecast. Alongside a robust rise in wage growth, evidence of a tightening US labour market was seen as bolstering Fed rate hike bets.

The publication of the latest ISM non-manufacturing PMI will likely be the most high-profile US data release this week, with the US dollar potentially strengthening if the US service sector expanded in line with expectations.

Elsewhere we are likely to see USD exchange rates influenced by the minutes from the Federal Reserve’s March meeting as well as a series of speeches by Fed policymakers. A broadly hawkish consensus could further bolster bets for a half-percentage increase at the bank’s May policy meeting and further buoy demand for the ‘greenback’.
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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