The pound retreated on Thursday after the Bank of England (BoE) struck a more cautious tone than expected following its latest policy meeting.
This initially resulted in USD exchange rates trending lower as upbeat sentiment and concerns over the impasse in Washington over the next round of US stimulus propelled the US dollar index to a fresh two-year low.
The ‘Greenback’ then came back in the middle of the week following the publication of the minutes from last month's Federal Reserve policy meeting. The US central bank soured market sentiment by warning of the ‘elevated uncertainty’ of the coronavirus pandemic’s impact on the US economy.
The USD recovery then faced some hurdles in the second half of the week as data showed that initial jobless claims in the US soared back above one million in the week ending the 15th.
However, the US dollar ultimately closed out the week as Friday’s top performer as the broad weakness of its currency peers and some upbeat US economic releases saw investors flock to the ‘Greenback’.
Turning to this week’s session, the main risk event looks to be the Federal Reserve’s annual Jackson Hole symposium.
Traditionally Jackson Hole has been a major date on US data calendars, with the Fed often using the event to send a clear message on monetary policy.
While this year's event will be taking place remotely, will the current economic circumstances lead to even more urgency to the Fed’s forward guidance?
Also on the data calendar this week will be the latest US GDP estimate, which could limit any upside in USD exchange rates as they look set to confirm the record slump in growth in the second quarter.
In addition, fresh US political uncertainty threatens to stoke volatility in the US dollar this week as tensions in Washington rise ahead of Donald Trump’s formal nomination as the Republican presidential candidate.
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)