USD fell last week against major world currencies as data showed that the U.S. economy created fewer jobs than expected in December. The decline was also attributed to the gain in Euro and GBP. The euro traded close to its highest level in three years against USD largely on optimism over a brightening economic picture in the eurozone as manufacturing survey showed that the Eurozone manufacturers ended 2017 by ramping up activity at the fastest pace in more than two decades. However, the release of upbeat U.S. economic data and Fed minutes, which showed that the central bank remained on track to raise interest rates several times this year supported USD in the later part of the week. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.19% on a week on week basis and is at a level of 91.95.
The Fed’s minutes acknowledged the U.S. labour market’s solid gains and the expansion in economic activity, even as the members affirmed worries about persistently low inflation. The minutes suggested that the central bank will continue to pursue a gradual approach in raising rates but could pick up the pace if inflation accelerates. Officials also discussed the possibility that the Trump administration’s tax cuts or easy financial conditions could cause inflation pressures to rise.
U.S. Department of Labour reported on Friday that the economy added 148,000 jobs in December, disappointing expectations for an increase of 185,000. The unemployment rate remained unchanged at 4.1%, as expected. The report also showed that U.S. average hourly earnings rose 0.3% last month, in line with projections.
U.S. construction spending rose 0.8% in the month of November to an all-time high of USD 1.257 trillion, driven by a surge in investment in private residential and non-residential projects
Institute for Supply Management reported that U.S. manufacturing index rose to 59.7 last month, beating market expectations. The Institute of Supply Management (ISM) also reported that its non-manufacturing purchasing manager’s index (PMI) decreased to 55.9 in December from the prior month’s reading of 57.4.
ADP reported on Thursday that U.S. private employers added 250,000 jobs in the month December, well above expectations of 191,000 followed by 185,000 jobs in November.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 29nd December rose by 3,000 to 250,000 against the expectations of a decline of 6,000 to 241,000.
Euro appreciated by 0.24% against USD last week. The euro was boosted after data shows that the euro area manufacturing sector expanded at a record pace in December, which bolstered expectations that the ECB will start to scale back its asset purchase program later this year. Further, the ECB board member in charge of the central bank’s market operations, Benoit Coeure, said over the weekend that he saw a “reasonable chance” that the bond purchases would not be extended beyond September.
The euro finished 2017 with its best year against the USD since 2003 as European economies strengthened and on expectations that the European Central bank will wind down its monetary stimulus, boosting demand for the single currency.
Commodity linked currencies continued to trade higher after a rally in metal and oil prices. Australian dollar, New Zealand dollar and Russian Ruble all appreciated against USD last week.
Asian currencies were largely up last week against the USD. Australian Dollar rose by 0.70%. New Zealand Dollar appreciated by 1.06%. Japanese Yen depreciated by 0.32% against the USD and depreciated by 0.54% against the Euro. South Korean Won appreciated by 0.45%, Philippines Peso depreciated by 0.06%, Indonesian Rupiah appreciated by 1.04%, Indian Rupee appreciated by 0.79% against the USD and appreciated by 0.22% against the Euro, Chinese Yuan appreciated by 0.28%, Malaysian Ringgit appreciated by 1.23% and Thai Baht appreciated by 1.16%.