The US dollar was strong this trading week thanks to the continuing speculations that the Federal Reserve is going to perform an interest rate hike in the near future, perhaps as soon as the next month.
Fed chief Janet Yellen added fuel to the hike talks yesterday, saying:
Itâs appropriate â and I have said this in the past, I think â for the Fed to gradually and cautiously increase our overnight interest rate over time. Probably in the coming months such a move would be appropriate.
The CME FedWatch page shows that bets on June monetary tightening are fairly low (and have fallen since before the Yellen’s speech). But chances for a Fed move in July are rising and are now standing above the 60% probability.
While fundamentals were good for the US dollar, it was just the third strongest currency during the week, being beaten by the Great Britain pound and the Canadian dollar. The pound was firming as fears about the Brexit recede. The Canadian dollar got boost from the balance policy statement from the Bank of Canada and rising oil prices.
EUR/USD dropped from 1.1207 to 1.1112 — the weakest weekly close since the beginning of March. USD/JPY ended the week at 110.41 following the opening at 110.10 and the fall to 109.10. GBP/USD climbed from 1.4504 to 1.4610. USD/CAD went down from 1.3117 to 1.3035.
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