As we are heading towards the weekend, the dollar is beginning to come back to life again. A lot of investors and analysts were left scratching their heads after Wednesday’s dramatic moves in the markets as dollar reversed earlier gains to head lower despite the release of stronger-than-expected CPI inflation data. The greenback extended its losses on Thursday thanks to momentum selling, before bouncing back today.
It has been a painful week of trading for the dollar. The Greenback has essentially reversed its recovery from the previous two trading weeks, to return back toward levels not seen since December 2014.
The U.S. dollar had its strongest week against major currency pairs in 12 months. Even as the United States is suffering a bout of political uncertainty, the dollar became a safe haven as stocks and bonds saw massive moves this week. The signing of a federal budget by U.S. President Donald Trump boosted the dollar ahead of the release of retail sales and inflation data next week. Central banks are moving away from record low interest rates around the globe.
The euro has been moving south at a slow but steady pace since Thursday mornings lower high. The yen finished on the low of the session as equity markets recovered firmly to settle up near the 3% mark.
The euro’s recent sharp gains could come to an abrupt end this week, as we anticipate that the European Central Bank President Mario Draghi will deliver a verbal intervention at its meeting on Thursday and dismiss speculation that the bank will end quantitative easing earlier than anticipated. This could help boost the Dollar Index, which fell to a fresh three-year low today.
There are no two ways about it: 2017 was a brutal year for U.S. dollar bulls. By mid-December, the world’s reserve currency had fallen against every one of its major rivals on the year, losing a staggering 12% against the euro and nearly 9% versus the British pound (see “Dollar daze,” below).