US Dollar Posts Strong Performance For Second Straight Week
The US dollar is all set to post another stellar weekly performance, registering solid gains against the Euro in particular, amid rising expectations for the Fed to hike interest rates soon even as the ECB plans to maintain its dovish stance for longer. At the time of writing, the US dollar index DXY is trading around 95.64.
So far this week, the dollar index has posted 0.5% of gains, and trade at the highest levels in 16 months. The biggest loser among the major currencies this week has been the EUR, which has weakened by as much as 0.6% so far this week amid worries of rising COVID-19 infections, more lockdowns and an uncertain economic outlook keeping the ECB dovish for longer.
To recap, the greenback was also helped higher by a stronger than expected retail sales which took markets by surprise. Amid soaring inflation, economists had expected the figure to come in weak, but the strong reading confirmed the rapid pace of economic recovery underway, boosting investor confidence that the Fed would take note of these factors and call for a rate hike by as soon as July 2022.
The US dollar has also been enjoying support as a safe haven currency as markets worry about the fresh spike in COVID-19 infections across Europe. Several EU nations have already announced restrictions and lockdowns while others are contemplating similar moves to contain the spread of infection. This development further dims the outlook for the common currency and bolsters the US currency’s appeal among investors.
Among the leading currencies, the Sterling has registered interesting gains this week, with GBP/USD climbing higher by 0.7% so far this week. The bullish moves were driven by a strong pick-up in inflation across Britain, which rose to the highest levels seen in a decade and raised hopes for faster rate hikes by the BOE, possibly by as soon as next month.
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