The US dollar ended the trading week strong thanks to the hawkish policy statement of the Federal Reserve. But the strongest currency was the Canadian dollar due to the better-than expected economic growth. The euro was weak, dragged down by the Italian budget.
The Fed raised its main interest rates by 25 basis points to 2%-2.25% as was largely expected. While initially the market could not decide how to interpret the policy statement, leading to volatile moves, ultimately traders concluded that it was hawkish, not dovish.
The euro weakened after the Italian government approved the budget running 2.4% deficit of gross domestic product. While it was technically within the 3% limit of the European Union, the decision drew heavy criticism from EU officials nonetheless.
Canada’s GDP rose 0.2% in July from the previous month, exceeding the average forecast of a 0.1% growth.
EUR/USD dropped from 1.1744 to 1.1601 over the week. GBP/USD opened at 1.3074, rose to the weekly high of 1.3217, but fell later and closed at 1.3019. USD/CAD ended the week at 1.2903 after opening at 1.2825 and rising to week’s high of 1.3082.
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