USD ended the week higher last week on better that expected U.S. monthly jobs report and Trump’s flexibility on U.S. tariffs. However, the gain in USD was limited despite strong job additions, as the average hourly earnings grew by just 0.1% in February, missing the expectations for a 0.2% rise. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.18% on a week on week basis and is at a level of 90.09.
The concerns about trade wars and military action in North Korea eased as the U.S. government softened its tone. U.S. President Donald Trump signed a more tempered version of the tariff plan on Thursday by imposing 25% tariffs on steel imports and 10% for aluminium but announced exemptions for Canada and Mexico and left the door open for exceptions for other countries.
A total of 313,000 jobs were created in the month of February, which was the largest one-month increase in 3.5 years. The jobless rate remained unchanged at 4.1%, missing expectations for a 0.1% decline to 4%. The jobs data has boosted the expectation of a rate hike by Federal Reserve in its March FOMC meeting.
USD started the week on a higher note as concerns eased over the prospects of a trade war sparked by U.S. President Donald Trump’s proposed steel and aluminium import tariffs, as markets took the view that the planned tariffs were a negotiating tactic after Trump stepped up pressure on Mexico and Canada, saying he would lift planned tariffs on steel imports if they signed a new version of the North American Free Trade Agreement, or NAFTA.
However, on Tuesday, USD reacted negatively as Gary Cohn, Trump’s economic adviser, announced his resignation. The decision was said to have been made following a disagreement between Cohn and the U.S. President over the import tariffs.
USD received a boost on Thursday after the release of robust U.S. private sector hiring data and on the news that North Korea’s leader, Kim Jong-un, was willing to meet with President Donald Trump.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 3rd March rose by 21,000 to 231,000 from previous week’s claim of 210,000 against the expectation of a rise of 10,000 to 220,000.
Euro depreciated by 0.08% against USD last week after European Central Bank President Mario Draghi downplayed a decision to drop a pledge to expand its quantitative easing program from its rate statement. The euro initially rose after the ECB dropped a pledge to extend its stimulus program if necessary from its rate statement, in a sign that it is moving closer to ending its massive monetary stimulus program.
The ECB revised higher its growth forecasts for 2018 to 2.4% from 2.3% in December and left its growth forecast for 2019 and 2020 unchanged at 1.9% and 1.7%, respectively. The ECB revised down its inflation forecasts for 2019 to 1.4% from 1.5% previously. It still expects inflation of 1.4% in 2018 and 1.7% in 2020.
Asian currencies were largely mixed last week against the USD. Australian Dollar appreciated by 1.08%. New Zealand Dollar appreciated by 0.61%. Japanese Yen depreciated by 1.00% against the USD and depreciated by 0.94% against the Euro. South Korean Won appreciated by 0.99%, Philippines Peso depreciated by 0.31%, Indonesian Rupiah depreciated by 0.29%, Indian Rupee was flat against the USD and depreciated by 0.95% against the Euro, Chinese Yuan appreciated by 0.17%, Malaysian Ringgit depreciated by 0.20% and Thai Baht appreciated by 0.37%.