The US dollar regained a portion of its recent losses as markets opened for the week on Monday, with the dollar index up around half a percent on last week’s two month lows.

The dollar is struggling so far in 2022 even as US Treasury yields surge higher and the market prices in a faster hiking cycle from the Federal Reserve.

Louise joins Ebury from HSBC where she was the Head of Innovation, Delivery and Capability Development.

A spike in US bond yields failed to support the dollar, while sterling outperformed its peers as markets bet on a rapid pace of rate hikes from the Bank of England.

The Federal Reserve made it clear that it is increasingly concerned about inflationary pressures at its December meeting, and the dollar reacted accordingly.

Thursday’s announcement from the ECB indicated a significant adjustment to asset purchases, as expected. More surprising were hawkish signals from the central bank that pushed the EUR/USD to the strongest level in about two weeks.

Sterling rose sharply against its main peers following a surprise decision of the Bank of England’s Monetary Policy Committee to deliver its first interest rate hike since the pandemic began.

The Federal Reserve announced it will accelerate the wind down of its QE programme, while FOMC members now expect a total of eight rate increases in the next three years, with three of these coming in 2022. Somewhat surprisingly, the dollar sold off after the event, while risk assets rallied.