It looked like members of the Federal Open Market Committee would make this week very bad for the US dollar by their dovish comments. Yet the currency was rescued by risk aversion that followed news about problems of a major Portugal’s bank. This did not help the greenback to outperform the Japanese yen but allowed the US currency to erase losses versus the euro and to gain on several other currencies, including the Great Britain pound and the Canadian dollar.
The week started poorly for USD as the currency attempted to rally several times but failed. Then the FOMC disappointed dollar bulls, failing to provide a clear guidance on timing for the expected interest rate hike, suggesting instead that economic recovery and subsequent monetary tightening are not guaranteed. Yet USD was rescued by fears about the European banking sector, which followed news that the parent company of one of Portugal’s largest banks failed to pay its debts.
Currencies of Great Britain and Canada performed especially poorly versus USD due to bad economic indicators from these countries. It was expected that Britain’s domestic fundamentals would support GBP, but it turned out that nothing could be further from truth. As for CAD, surprisingly poor employment data from Canada hurt the currency very much even though the report was not completely negative.
EUR/USD ended the trading week at 1.3608 after opening at 1.3595 and rallying to 1.3651. GBP/USD slid from 1.7166 to 1.7121, touching the weekly low of 1.7085 and demonstrating the first weekly loss after five weeks of gains — the longest stretch of weekly gains since 2012. USD/JPY sunk from 102.06 to 101.32, while USD/CAD soared from 1.0646 to 1.0733 (0.7 percent) during this week.
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