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Weekly roundup: US dollar knocked by dovish FOMC minutes

currency-newsWeekly roundup: US dollar knocked by dovish FOMC minutes
The US dollar got off to a strong start last week, with demand for the safe-haven currency being bolstered in the face of heightened geopolitical tensions as Russia appeared to be preparing to invade Ukraine.

Some of these gains were subsequently reversed in response to claims from Moscow that it had withdrawn some of its forces from its border with Ukraine.

However, the primary catalyst behind the US dollar’s losses last week came with the publication of the minutes from the Federal Open Market Committee’s (FOMC) January policy meeting.

These placed some notable pressure on USD exchange rates as they struck a more dovish tone than analysts had been expecting, with the US dollar stumbling as investors repriced their expectations for a half-percentage rate hike from the Federal Reserve in March.

While the US dollar was able to recoup some of its losses in the latter half of the week as Russia-Ukraine tensions flared again, it was not enough to prevent the ‘greenback’ closing the week lower.

The closure of US markets for President’s Day as well as hopes for a de-escalation of Russia-Ukraine tensions sees the US dollar open this week on the back foot.

Later in the week we could see the US dollar bolstered by the latest PCE price index, as an uptick in the Fed’s preferred measure of inflation could revive expectations for an aggressive rate hike in March, if January’s index prints strongly.

Also of note will be Friday’s durable goods orders. Will a rebound in order growth last month also reflect positively on the US dollar?
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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