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Weekly roundup: US dollar slides following record high US inflation

currency-newsWeekly roundup: US dollar slides following record high US inflation
The US dollar fell sharply last week after a risk-on market mood weighed on demand for the safe-haven currency in the wake of comments from Federal Reserve policymakers and US inflation soared to a record high.

Comments from Fed chair Jerome Powell to the US Senate cooled investor fears that the central bank would follow aggressive quantitative tightening by saying it is yet to decide on a plan to reduce its balance sheet.

Amid the improved market mood, US Treasury yields slipped, which also weighed on the US dollar.

December’s US inflation rate meeting expectations of a 40-year high of 7% lifted market mood further and sparked a USD selloff as many investors had appeared to price in an even higher reading.

However, the US dollar clawed back some of the week’s losses on Friday as US retail sales unexpectedly contracted -1.9% in December, and the Michigan consumer sentiment index for January fell to the second lowest level in a decade.

The downbeat data soured market sentiment and modestly increased demand for the safe-haven ‘Greenback’.

USD exchange rates have started this week on the back foot as US markets close for a national holiday and an increased risk appetite dents the safe-haven US dollar.

Amid a lack of significant US economic data releases this week, expectations for a Federal Reserve rate hike at its March policy meeting will remain a key driver in USD exchange rates.

Comments from prominent Fed policymakers at the end of last week signalling higher rates are likely at its March meeting will likely help underpin USD as the central bank officials enter the blackout period before January’s meeting.
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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