Home » Daily Commentaries » US dollar strengthens on rising Fed rate hike hopes

US dollar strengthens on rising Fed rate hike hopes

Monday 17 January, 2022

Daily Currency Update

The US dollar strengthened on Friday, despite the release of weaker than expected December US Retail Sales, which came in at -1.9% vs. an expected 0.0% - the Omicron variant played a part in explaining the weaker data away. It was continued and rising expectations for more US Federal Reserve rate hikes alongside rising US yields which lent support to the US dollar through the afternoon session. GBP/USD trickled back below the 1.37 figure to an eventual low of 1.3655 on the day as a result, this too being counterintuitive to the better-than-expected UK GDP data released earlier on Friday morning which showed the UK economy expanded by 0.9% in November vs. expectations for 0.4%. EUR/USD traded a similar trend to GBP/USD on Friday, dropping to, but finding solid support at around 1.14.

Key Movers

It’s a quiet day today as far as economic data is concerned. It’s also a public holiday in the U.S. and so ranges will likely be limited over the next 24 hours or so. Later this week, look out for German ZEW Economic Sentiment tomorrow morning and UK CPI (inflation data) early on Wednesday morning; December’s print came in above expectations at 5.1% and investors are expecting another strong print this month at 5.2%. Bank of England Governor Bailey is then due to testify that afternoon on the bank’s Financial Stability Report, which should hopefully provide a useful gauge on how many more rate hikes (and how soon they might be) are in the pipe over the more immediate term.

Expected Ranges

  • GBP/USD: 1.3635 - 1.3695 ▼
  • GBP/EUR: 1.1965 - 1.1995 ▲
  • GBP/AUD: 1.8915 - 1.8995 ▲
  • EUR/USD: 1.1385 - 1.1445 ▼