Weekly Roundup: US dollar rallies on impressive US data 

The US dollar traded in a narrow range through the first half of the week, with USD investors reluctant to reposition ahead of the Federal Reserve’s latest interest rate decision. 

USD exchange rates then plummeted as the Fed concluded its July policy meeting. As was widely expected, the Fed raised rates by 25bps. But Fed Chair Jerome Powell was non-committal regarding the possibility of another rate hike in September, disappointment at which caused a sharp drop in the US dollar. 

USD exchange rates were quick to bounce back on Thursday with the publication of some impressive US data. USD investors were particularly cheered by a surprise uptick in US GDP in the second quarter, as this revived hopes for another Fed rate hike. 

However, the US dollar then trimmed these gains at the very end of the week as it was undermined by some profit taking and a larger-than-expected fall in the Fed’s preferred indicator for inflation, the core PCE price index. 

The publication of the latest US non farm payroll figures will be in the spotlight for USD investors this week. Expect to see the US dollar face headwinds if the number of jobs added last month continued to fall.