Investing.com - The U.S. dollar skyrocketed against a basket of major currencies on Friday, following comments from two top Federal Reserve officials that hinted at a potential U.S. interest rate hike as early as next month.
During a much-awaited speech at the Fed's Jackson Hole symposium Friday, Fed Chair Janet Yellen said the case for U.S. interest rate hikes has “strengthened” in recent months due to improvements in the labor market and to expectations for solid economic growth.
However, she did not indicate when the Fed would act, saying that higher interest rates will depend on incoming economic data.
Speaking shortly afterwards, Fed Vice Chair Stanley Fischer said Yellen’s speech was “consistent” with expectations for possibly two more rate hikes this year, opening the door to a September hike. Fischer, the Fed's No. 2 policymaker, said the Labor Department's jobs report for August will likely weigh on the decision over a hike.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, jumped to a daily peak of 95.58, the most since August 16. It ended the day at 95.48, up more than 0.8%.
For the week, the index rose 1.12%, as investors began to price in a greater likelihood that the Fed will raise rates this year.
According to Investing.com's Fed Rate Monitor Tool, investors are pricing in a 33% chance of a rate hike by September. December odds were at around 60%.
Against the yen, the dollar soared 1.26% to end at 101.80 by late trade after touching 101.94, the most since August 12. For the week, the pair climbed 1.61%, the first loss in five weeks.
Earlier Friday, data showed that consumer prices in Japan fell by the most in three years in July, adding pressure on both the government and the Bank of Japan to do more to boost sluggish inflation.
The euro, meanwhile, slipped 0.77% to settle at 1.1195, the lowest level since August 16. On the week, the euro lost 1.13% against the dollar, snapping a two-week win streak.
Elsewhere, the pound settled at 1.3140 against the greenback, down 0.4% for the day but 0.5% higher for the week, amid easing concerns over the economic outlook.
Data released Friday confirmed that the U.K. economy grew by 0.6% in the second quarter and expanded 2.2% on a year over year basis, indicating that the economy remained strong ahead of the Brexit referendum.
In the week ahead, investors will focus on U.S. economic reports to gauge if the world's largest economy is strong enough to withstand a hike in interest rates in the coming months, with Friday’s nonfarm payrolls data in the spotlight.
Elsewhere, in China, market players will be looking out for data on the country's manufacturing sector, amid ongoing concerns over the health of the world's second biggest economy.
Meanwhile, in the U.K., traders will be awaiting reports on activity in the manufacturing and construction sectors for further indications on the continued effect that the Brexit decision is having on the economy.
Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, August 29
Markets in the U.K. are to remain closed for a national holiday.
The U.S. is to release data on personal income and expenditure.
Tuesday, August 30
Japan is to release data on household spending.
Australia is to report on building approvals.
In the euro zone, Germany and Spain are to produce preliminary figures on consumer prices.
The U.K. is to report on net lending.
Canada is to release numbers on the current account and raw material price inflation.
The U.S. is to publish private sector data on consumer confidence.
Wednesday, August 31
New Zealand is to release data on business confidence.
Germany is to release reports on retail sales and the change in the number of people unemployed.
The euro zone is to publish a preliminary report on consumer prices.
Canada is to release monthly data on gross domestic product.
The U.S. is to release the ADP nonfarm payrolls report, as well as data on pending home sales and survey data on business activity in the Chicago region.
Thursday, September 1
China is to release official data on manufacturing and service sector activity as well as the Caixin manufacturing index.
Australia is to report on private capital expenditure and retail sales.
The U.K. is to release survey data on manufacturing activity.
The U.S. is to release the weekly report on initial jobless claims and the Institute of Supply Management is to report on manufacturing activity.
Friday, September 2
The U.K. is to release survey data on construction activity.
Canada is to release data on the trade balance.
The U.S. is to round up the week with the closely watched report on nonfarm payrolls and data on the trade balance.