US Dollar Ends Week Soft After Fed Announcement, Trade Wars

The US dollar fell this week due to the fears of trade wars and disappointment after the monetary policy announcement by the Federal Reserve.

The United States decided to start a trade war with China, and that was the major theme of the week, which was weighing on the dollar. The Fed raised interest rates, as was expected, but did not announce additional interest rate hike in 2018, keeping intact the plan for three rate hikes in total this year. Such decision disappointed those dollar bulls who were counting on an announcement of a fourth hike.

The Canadian dollar was the strongest this week due to optimism about the NAFTA negotiations after the USA dropped the toughest protectionist demand — that at lest 50% parts in vehicles imported from Mexico and Canada should made in the United States. Additionally, the loonie got a boost from the bigger-than-expected inflation.

The Great Britain pound rallied at the start of the week on news that Britain and the European Union achieved a Brexit deal. Yet Brexit worries resurfaced following the Bank of England policy meeting.

EUR/USD rallied from 1.2288 to 1.2351 this week. GBP/USD advanced from 1.3942 to 1.4129, touching the weekly high of 1.4218. USD/CAD dropped from 1.3091 to 1.2896, and its weekly low was at 1.2824.

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