The US dollar demonstrated very strong performance during the trading week, and it was a surprise considering all the bad data that has been released from the United States lately. Yet the greenback ended the week with big gains, mostly thanks to the Friday’s surge.
Initially, it looked like the dollar might experience another terrible week as many US economic reports were not particularly good. The Federal Reserve basically ruled out a June interest rate hike in its policy minutes, adding to the pressure on the dollar.
Yet everything changed after the inflation data released on Friday. The report itself was rather mixed as it showed slower growth of consumer prices in April, but faster growth of the core components. It looked like traders focused on the good part of the report as the currency soared afterwards.
Speech of Janet Yellen, Chairperson of the Federal Reserve, provided additional boost for the greenback as she confirmed that monetary tightening is possible later this year:
If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target and begin the process of normalizing monetary policy.
EUR/USD sank from 1.1449 to 1.1007, falling as much as 3.3 percent over the week. GBP/USD dropped from 1.5738 to 1.5475, demonstrating a 1.7 percent decline. USD/JPY rallied by 1.9 percent from 119.30 to 121.54.
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