Weekly Roundup: US dollar fluctuates amid shifting market mood and Fed expectations

The safe-haven US dollar slipped at the start of last week, as a risk-on rally in markets dampened USD’s appeal.

However, rising US Treasury yields and better-than-expected manufacturing data limited the US dollar’s losses on Tuesday.

The market mood soured in the middle of the week, giving the ‘greenback’ a boost. Russia-Ukraine worries, China growth concerns and UK political chaos all contributed to risk aversion. However, sentiment then shifted through the rest of the week, causing some volatility in USD.

On Friday, USD initially firmed before reports that the Federal Reserve would slow its pace of policy tightening saw the dollar slump.

So far this week, downbeat PMIs from Australia, the UK, and Europe have added to fears of a global economic downturn, which is driving currency traders to the safe-haven US dollar.

Preliminary GDP data for the third quarter of this year is expected to show that the US economy returned to growth, which could boost USD later in the week.

Perhaps the most impactful release, however, will be Friday’s core PCE price index. Economists expect the Fed’s preferred measure of inflation to jump again in September, which could prompt further hawkish action from the US central bank.