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Weekly Roundup: US dollar rocked by Fed rate decision

currency-newsWeekly Roundup: US dollar rocked by Fed rate decision
The US dollar stormed higher through the first half of last week, carrying over the momentum which followed the release of the hotter-than-expected US inflation figures the previous Friday.

The surprise jump in domestic inflation saw USD investors hastily revise their Federal Reserve rate hike expectations, with the ‘greenback’ soaring as they priced in a 75bps rate hike for Wednesday.

The revised Fed rate hike bets also reignited global recession fears, which further reinforced demand for the US dollar at the start of the week.

However, the US dollar then fell sharply in response to the Fed’s interest rate decision. While the Fed delivered a 75bps hike, its forward guidance proved a little less hawkish than expected leading to some notable USD selling pressure.

After licking its wounds on Thursday on the back of some lacklustre US data, the ‘greenback’ then bounced back at the end of the week, following comments from Fed Chair Jerome Powell. USD investors seized on remarks in which Powell state the Fed is ‘acutely focused’ on returning inflation to the bank’s 2% goal.

The US dollar is off to a slow start so far this week amid thin trading conditions in the currency as US markets are closed for the Juneteenth holiday.

Later in the week the focus will turn to Powell’s two-day testimony in front of Congress. Powell is likely to be grilled on what the Fed is doing to combat inflationary pressures, with the US dollar potentially surging if Powell reiterates the bank’s commitment to bringing inflation under control.
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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