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Weekly Roundup: US dollar strikes 20-year high amid considerable USD demand

currency-newsWeekly Roundup: US dollar strikes 20-year high amid considerable USD demand
The US dollar rocketed higher last week, with investors initially flocking to the currency amid significant risk-off flows.

The deterioration in market sentiment came amidst growing fears over China’s Covid outbreak, with investors fearing Beijing could be placed into lockdown following a spike in new cases.

A persistent bearish mood in addition to a rebound in US durable goods orders helped the US dollar to build on these gains through the first half of the week.

Russia’s halting of gas exports to Poland and Bulgaria then triggered more risk-off flows in mid-week trade, which in addition to growing expectation for a series of aggressive interest hikes from the Federal Reserve in the coming months, further underpinned the US dollar in mid-week trade.

The US dollar then maintained this bullish momentum in the second half of the week in spite of the latest US GDP figures reporting a shock contraction in US economic growth in the first quarter of 2022.

A market correction then provided other currencies a brief respite from the US dollar’s impressive surge, with USD investors booking some of their profits.

Turning to this week’s session all eyes will be on the Fed as it set to deliver a well-telegraphed 50 basis point interest rate hike as it concludes its May policy meeting on Wednesday.

While this hike is largely priced in, any strong hints that the Fed will maintain the current pace of monetary tightening could help to push the US dollar even higher.

The end of the week will then see the release of the highly influential US non farm payroll figures, where another strong increase in employment growth last month could help to reinforce any upside in the US dollar.

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