The weaker US Dollar was embraced by Steven Mnuchin, the US Secretary of Treasury, “Stronger dollar is in the best interest of the country.” The weaker dollar might not alarm the Federal Reserve very much, in fact it could help the central bank finally achieve its 2% inflation target, economists said last Wednesday. A weaker dollar increases demand for US products and services and can boost import prices, pushing consumer prices up at an even faster pace. This would be welcome at the Federal bank as inflation has lagged below the Fed’s 2% target since the 2008 Great Recession.
The sterling was also among the best gainers last week as it finally broke the $1.40 threshold against the US Dollar. The cable received a lift following the better UK Q4 GDP data, over optimism that the economy is doing better than predicted.
Crude oil was on course for its third weekly gain this month as the cheap U.S. Dollar increased demand for dollar-denominated commodities as supply tightens. Crude oil inventories recorded the 10th week of drawdown on American stockpiles. The crude market will remain backwardated throughout this year with prices trading between $60 and $75 a barrel, Mercuria Energy CEO Marco Dunand said during an interview in Davos.
Are we Heading for a Currency War?
Weekly Report - 28/01/2018