The greenback headed for its biggest weekly loss in four months after a gloomy reading of U.S. economic data prompted investors to lower expectations of a tightening by the Federal Reserve (Fed).
In the first quarter, US domestic product (GDP) was reported to decline 1.5% compared to market expectations for a contraction of 1.3%. This is the second estimate of GDP, with initial assessments showing the economy declining by 1.4%.
The weakness of the U.S. dollar was also driven by a decline in U.S. bond yields and cautious statements from some Fed policymakers signaling that dollar gains based on aggressive rate hikes may stall for the time being.
Sentiment this week has been supported by hopes of a global recovery from Shanghai’s announcement to exit the Covid-19 blockade that has been in place for months.
The Aussie dollar and the kiwi are among the currencies that benefited from the report, while also supported by the decision of the New Zealand central bank (RBNZ) to raise its interest rates higher.
However, the recent increase in infection cases in Beijing has raised market doubts about global growth prospects.
Meanwhile, the USD monarch’s decline has benefited other major currencies to rise, particularly the euro which was also driven by expectations of an interest rate hike by the European Central Bank (ECB).
The pound, meanwhile, strengthened to a three -week high despite a gloomy reading of economic data on Tuesday raising doubts that the Bank of England (BOE) would continue tightening.
