USD: US dollar on the back foot after interest rate speculation abated

The US dollar weakened against a basket of currencies on Thursday in a retreat from a two-week high. This came after speculation surrounding an interest rate hike by the Federal Reserve in the near future abated. On Wednesday, the Fed said it would begin to taper its quantitative easing programme in October, which will come in the form of reducing its $4.2 trillion worth of bond holdings.

In other news, the US reported better than expected unemployment claims yesterday, coming in at 259,000 against an expectation of 302,000. That is down from 282,000 the previous week, but it still did little to drive any dollar movement.

Today is quiet on the economic data front, so we expect Fed Chair Janet Yellen’s words on Wednesday evening to continue to drive any dollar activity. Having said this, Theresa May’s key Brexit speech could wield some influence on currency movements.

For more on currencies and currency risk management strategies, please get in touch with your Smart Currency Business trader on 020 7898 0500 or your Private Client trader on 020 7898 0541.