The US dollar ended the week with gains against most major currencies (but not versus the Great Britain pound). The reason for the good performance was the outlook for monetary tightening, supported by comments from Fed Chair Janet Yellen.
For the whole week, traders were waiting for Yellen’s speech at the Jackson Hole Meeting, hoping that she might reveal timing for the next interest rate hike. In reality, she did not provide a specific date, but hinted that it may happen soon, though the exact timing depends on economic data:
Indeed, in light of the continued solid performance of the labor market and our outlook for economic activity and inflation, I believe the case for an increase in the federal funds rate has strengthened in recent months. Of course, our decisions always depend on the degree to which incoming data continues to confirm the Committee’s outlook.
Bets on a hike this year rose after the announcement.
While the dollar ended the week as the second strongest currency, the first one was the pound. Strong macroeconomic indicators released from the United Kingdom eased concerns about impact on the Brexit on the UK economy, making the sterling more appealing to investors.
EUR/USD dipped 1% from 1.1307 to 1.1192 during the week. GBP/USD ticked up from 1.3073 to 1.3127, touching the weekly high of 1.3272. USD/CHF jumped 1.8% from 0.9607 to 0.9779.
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