US Dollar Ends Week Mixed amid Uncertain Fed Outlook, Worsening US-China Trade Relations

The US dollar ended the week mixed. While the week was expected to be important for markets due to several important events, the actual market mover was unexpected worsening of trade tensions between the United States and China.
Markets were waiting for Federal Reserve’s minutes to give hints about possible future interest rate cuts. But the notes did not outline specific plans, saying that policymakers will “act as appropriate”. Traders put even bigger hopes on the speech of Fed Chairman Jerome Powell at the Jackson Hole Symposium on Friday. But it was also disappointing, giving no specific hints. Overall, the general consensus remained that the Fed will perform at least two more cuts this year.
But what ultimately caught traders’ attention was the escalation of US-China trade conflict. First, China said it will respond to US tariffs with its own levies. Then, US President Donald Trump reacted with threats. That hurt the market sentiment and the US dollar.
As for other currencies, the euro got hit from the clearly dovish minutes of the European Central Bank. Still, that did not prevent it from gaining on the dollar. The Great Britain pound got support from the optimism of German Chancellor Angela Merkel about a possible resolution of the Irish backstop issue.
EUR/USD gained from 1.1092 to 1.1139. GBP/USD rallied from 1.2147 to 1.2281, bouncing from the weekly low of 1.2064. AUD/USD declined from 0.6776 to 0.6747.

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