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Weekly roundup: US dollar firms as US inflation climbs to new 40-year high

currency-newsWeekly roundup: US dollar firms as US inflation climbs to new 40-year high
The US dollar got off to a strong start last week with investors flocking to the safe-haven currency on Monday amidst fears a US/EU ban on Russian oil could spark some considerable market volatility.

The ‘greenback’ then relinquished ground in mid-week trade as hopes for a negotiated end to the war bolstered market risk appetite at the expense of the US dollar.

USD exchange rates bounced bank on Thursday following the publication of the US consumer price index, after it reported domestic inflation soared to a new 40-year high of 7.9%.

This helped to bolster Federal Reserve rate hike expectations as well as sparking wider concerns over global inflationary pressures.

The US dollar closed the week on a high, after the latest round of Russian-Ukrainian peace talks ended without a breakthrough being found.

In the spotlight this week will be the Fed’s long-awaited March policy meeting in which it is expected to officially start its latest tightening cycle.

While a rate hike this month seems all but guaranteed, there remain some questions over just how aggressive it will be. A surprise half-percentage hike could provide considerable support for the US dollar.

In addition the Fed will also publish its latest economic projections this week. The US economy is likely to be reasonably shielded from any fallout from the war in Ukraine so these could also reflect positively on the ‘greenback’.

Otherwise the US dollar could face some headwinds through the first half of the week as optimism over the situation in Ukraine may dampen safe-haven demand
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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