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Weekly roundup: US dollar rebounds from Fed sell-off as Omicron fears spook investors

currency-newsWeekly roundup: US dollar rebounds from Fed sell-off as Omicron fears spook investors
The US dollar traded in a wide range last week as markets reacted to the Federal Reserve’s latest interest rate decision, at the same time as fears over the Omicron Covid variant continued to rise.

At the start of the week this saw USD exchange rates strengthen as a cautious market mood prevailed.

The Fed struck a broadly hawkish tone in its final interest rate decision of the year, with the US central bank announcing an acceleration of its tapering plans, whilst also signalling it could hike interest rates up to three times in 2022.

Despite this, USD investors unwound their positions in the currency on Wednesday as Fed Chair Jerome Powell suggested it would ‘not be appropriate to raise rates’ while the tapering process is ongoing.

The US dollar then remained on the back foot on Thursday after some disappointing US economic data.

However, a notable souring of market sentiment, driven by Omicron fears, then propelled the ‘greenback’ sharply higher again at the end of the week.

Turning to this week’s session, its likely we could see the US dollar attract considerable support as Omicron concerns already look to be souring market sentiment, amidst fears the variant could stifle the global economic recovery.

Elsewhere, the publication of the latest US durable goods order release could bolster USD exchange rates if order growth rebounds as forecast last month, especially if the accompanying PCE price index prints higher as well.
 
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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