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Weekly roundup: US dollar infused with volatility by Fed rate hike speculation

currency-newsWeekly roundup: US dollar infused with volatility by Fed rate hike speculation
The US dollar traded in a wide range again last week, amidst considerable speculation regarding the Federal Reserve’s next interest rate hike.

At the start of the week, comments from Moderna CEO Stéphane Bancel, predicting current Covid vaccines may be less effective against the Omicron variant saw USD exchange rates plunge, on the expectation this could result in a more cautious approach to monetary policy from the Fed.

However, USD investors would later do a 180 following comments from Fed Chair Jerome Powell, in which he indicated the US central bank could accelerate its tapering plans, potentially opening the door to the Fed hiking interest rates earlier than previously thought.

Alongside ongoing Omicron jitters, which sapped market risk appetite, this helped to ensure the US dollar remained in demand through the latter half of the week.

However, these gains were tempered somewhat by the release of the latest US non-farm payroll print, after the US economy added far fewer jobs in November than expected, which offset a surprisingly strong ISM services PMI release.

Turning to this week’s session, the US dollar looks to be facing an uphill battle as suggestions that the Omicron Covid variant may result in milder symptoms helped to cheer market sentiment at the expense of the safe-haven ‘greenback’.

Looking to the end of the week however, there is a strong chance the US dollar could rally on the back of the latest US CPI print, as November’s figures are expected to confirm domestic inflation continued to accelerate, putting more pressure on the Fed to start hiking interest rates.
 
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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