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The FOMC monetary policy statement and U.S. employment report were the highlights of a very active week for the U.S. dollar.

Overlay of USD Pairs: 1-Hour Forex Chart
Overlay of USD Pairs: 1-Hour Forex Chart

Major Market Drivers for the U.S. Dollar

Global risk sentiment was an influence on U.S. dollar pairs this week, and for a broader rundown of what drove global risk sentiment, check out my review of this week’s risk sentiment drivers and its effects on market behavior in my Japanese yen weekly review here.

In short, the global risk-off sentiment early in the week (sparked by  weak industrial earnings from China that likely dampened global economic sentiment) is likely the reason why we saw the Greenback’s performance against the safe haven currencies lag versus the high-yielders/comdolls.

Global risk sentiment reversed to positive from Wednesday through the end of the week (with the help of the dovish FOMC monetary policy statement from the U.S.), which is likely why we saw the Greenback under perform greater against the high-yielders while versus the under performance against the safe haven currencies (JPY, CHF, & USD) at the end of the week.

And speaking of the FOMC monetary policy statement, that was undoubtedly this week’s main event for the financial markets. The Federal Open Market Committee of the Federal Reserve unanimously voted to hold its policy rate in a range between 2.25 percent and 2.5 percent and dropped expectations for further tightening with a much more dovish statement relative to the December meeting.

This is when we saw our first uniform U.S. dollar move, this time to the downside as traders priced out future rate hikes and shifted to a risk-on stance in currencies, equity and commodity markets.

And we saw one other arguable uniform U.S. dollar move off of U.S. catalysts this week, this time on Friday during the morning U.S. session. This is likely on a combination of a ‘scorching’ U.S. jobs number and solid ISM manufacturing survey report (arguably putting to bed arguments of a recession coming in the U.S.). USD pairs generally moved to the upside with exception against the Canadian dollar that likely separated the herd thanks to the strong rise in oil, possibly lifted by the same positive U.S. data catalysts. Overall, the last minute rally wasn’t enough to fix the damage done by the FOMC meeting, making the Greenback a big loser on the week.

United States Headlines and Economic Data