The US dollar has experienced an eventful week, with plenty of key events pushing the currency to long-term highs in certain areas. Monday saw the National Association of Home Builders’ Housing Price Index come out at a seven-month high, driving the dollar upwards against the euro. Further data from this sector helped the currency strengthen on Tuesday, as the number of residential buildings started in the last month was at its highest in eight months. This allowed the dollar to reach the best levels in nine months against the euro, and four months against sterling.
Alongside this, inflation figures remained steady, meaning investors began to ponder the timescales of a possible interest rate rise. Speculation over this ahead of the Federal Reserve’s meeting extended the high against the euro to 11 months, as hopes for a stronger indications of a potential interest rate hike intensified. The meeting showed that the committee had moved closer to raising interest rates than expected, which helped the US dollar strengthen across the board. Yesterday continued with solid data; unemployment claims were as expected and manufacturing data from the Philadelphia Federal Reserve was strong.
However, there is nervousness today as Janet Yellen, the Head of the Federal Reserve, is due to speak at the summit in Wyoming. Will she be positive about the US economy and reinforce the need for interest rate rises in the not too distant future or will she work hard to dampen market expectations of it happening any time soon!. This will be the main point of interest for investors ahead of the weekend.