Currency Note US Dollar

Uncertainty over interest rates unsettles the US dollar

By Ricky Bean October 17th, 2014

The US dollar had a slow start to the week, with a bank holiday stateside closing markets. The currency made up for lost time on Tuesday, with positive speculation over the wider economic picture. Weakening performance from sterling and the euro added to beliefs that the US was best placed to weather tougher times. Mid-week then brought a hive of activity, most of which was negative for the dollar. Five- and three-week lows were seen against the yen and the euro respectively, as the retail sales data from stateside fell by more than had been anticipated, alongside worse than expected inflation figures.

Yesterday saw a slight reversal in this, as the dollar managed to gain back some of this ground against most partners. This came thanks to some more positive figures in key areas, notably the labour market. The unemployment claims figure came out better than expected, while both the industrial production and manufacturing index from the Philadelphia Federal Reserve followed suit to support this. These results were enough to overcome the negativity shown by one member of the Federal Reserve, who stated that the ending of quantitative easing in the country should be delayed given the current inflation situation.

Today keeps the activity high into the weekend, with both building permits and consumer sentiment on the physical figures side. Investors will surely also be keen to hear words from Federal Reserve Chair Janet Yellen, who will be speaking this afternoon. Her views will be heavily scrutinised as investors look for clues as to how the Federal Reserve will act on monetary policy and interest rates.