The US dollar slumped during the week after Federal Reserve Chairman Jerome Powell made a U-turn, saying that interest rates close to neutral levels. The currency recovered later following the Fed policy minutes. Commodity currencies were strongest during the week, with the exception of the Canadian dollar.
US stocks climbed, while the greenback tumbled, after Powell stated that borrowing costs are “just below” the neutral level, contradicting his previous statements that interest rates are a long way from reaching neutrality. Yet the dollar bounced after the Fed minutes said that the next rate hike will likely happen “fairly soon.” Indeed, CME FedWatch shows more than 80% of a hike in December.
The Canadian dollar was unable to join its Australian and New Zealand counterparts in a rally, being dragged down by the unexpected contraction of Canada’s economy and tumbling crude oil prices. The euro also suffered from underwhelming domestic macroeconomic data, including underwhelming domestic macroeconomic data.
EUR/USD closed at 1.1316 after opening at 1.1341. AUD/USD climbed from 0.7232 to 0.7308 during the week. USD/CAD advanced from 1.3224 to 1.3286.
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