The outlook for the US dollar has turned more uncertain than ever. Disappointment that the Federal Reserve did not offer a more definitive signal that US interest rates would rise this year weighed on the dollar and knocked it to one-month lows against a wide swath of rivals. Against sterling, the dollar slumped to its lowest in seven months. Once again, the Fed said that rates could rise later this year, repeating a familiar refrain that has already become a part of the dollar’s fabric. Along with a cut in its growth forecast for this year, the Fed’s overall tone sounded dovish, injuring the dollar. The dollar’s outlook isn’t necessarily a markedly darker one though as the Fed left the ball in the US economy’s court. Better US data would keep a 2015 rate hike on track and perhaps support the dollar in a way the Fed statement this week did not. Doubts about when US rates will rise will remain selling points for dollar bears. But America’s higher rate outlook will offer a longer run advantage for the dollar whose biggest rivals are expected to trail the Fed in tightening policy.

Euro

The dip in the dollar helped the euro throw caution surrounding Greece to the wind. The euro soared to fresh one-month highs against its US counterpart after the Fed this week stopped short of an ironclad signal that rates would rise this year. Instability should remain the name of the game for the euro until markets know definitively what the immediate future holds for Greece. A higher risk of a Greek default should, at the very least, slow the euro’s ascent against the dollar.

Sterling

A trio of factors has formed quite a supporting cast for the pound which soared to seven-month highs against the dollar and fared even better on a broadly-weighted basis, notching seven-year peaks. The pound has found durable support in renewed optimism in the UK economy. Retail sales topped forecasts, while wage growth this week proved the fastest in years. Greece’s debt troubles have burnished the pound’s safe haven allure, while a weaker greenback has also worked in the pound’s favour.

US dollar

Mixed news on US jobs and inflation added to the cloudy outlook for US interest rates which did little to move the dollar from one-month lows. Core inflation ticked downward to an annual rate of 1.7 per cent, away from the Fed’s two per cent comfort level. The job market remained the economy’s MVP though as weekly claims improved. Weekly jobless have hovered at historically healthy levels below 300,000 for 15 weeks in a row, a good sign for the next payrolls report.