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USD edges up on Fed rate hike hopes

Monday 17 January, 2022

Daily Currency Update

Demand for the US dollar was slightly up on Monday morning amid a quiet day for economic data. USD had strengthened on Friday despite weaker than expected December US retail sales. Aided by a broad-based risk-off tone, USD shrugged off poor retail sales figures and PPI numbers to break the downward trend it had faced throughout last week. Despite the late comeback at the weekly close, some analysts say rising expectations for sooner than expected US Federal Reserve rate hikes alongside rising US yields could continue to support the US dollar but some volatility for the currency could remain if data continues to be mixed. The US Dollar Index was up 0.12%, trading at 95.28 at the time of writing.

Key Movers

Employment and inflation data from the UK will be in focus this week, as investors digest the data ahead of a Bank of England meeting next month where the central bank is widely expected to raise interest rates. A high inflation reading could further support the chance of a BoE rate hike in February, leading to investor confidence in the pound. The euro could also see movement as German ZEW economic sentiment, Euro zone consumer confidence figures and minutes of the European Central Bank’s December policy meeting are all due this week. The Australian dollar also looks to China for direction with Chinese GDP figures set to take center stage.

 

Expected Ranges

  • EUR/USD: 1.1396 – 1.1432 ▼
  • GBP/USD: 1.3639 – 1.3688 ▼
  • AUD/USD: 0.7199 – 0.7229 ▲
  • USD/CAD: 1.2502 – 1.2556 ▼