USD ended the week lower amid trade worries, geopolitical tension and the release of weak economic data last week. However, some respite for USD came in after the release of minutes from Federal Reserve’s March meeting, which showed that fed officials believe that the economy will continue to firm, and that inflation will rise towards their 2% target in the coming months. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.34% on a week on week basis and is at a level of 89.80.
Geopolitical tensions between the U.S. and Russia weighed heavily on the USD last week after U.S. President Donald Trump warned Russia to “get ready” for imminent military action in response to an alleged chemical attack over the weekend, to which a Russian diplomat said his country’s forces would shoot down U.S. missiles launched at Syria. Trump’s comments raised the prospect of direct military conflict between the U.S. and Russia in Syria, escalating tensions in the Middle East.
USD started the week on a cautious note amid renewed trade jitters after U.S. President Donald Trump made another twitter intervention into the current trade dispute with China. China said that it was prepared to hit back “forcefully” if U.S. President Donald Trump followed through on a threat to impose USD 100 billion in additional tariffs on imports.
The trade concern eased on Tuesday after Chinese President Xi Jinping promised to lower import tariffs. Speaking at the Boao Forum for Asia, Xi said that China would lower import tariffs on vehicles, encourage imports and strengthen the protection of intellectual property. Xi also said that a Cold War mentality, zero-sum thinking, and isolationism was out of place in today’s world and only peaceful development and cooperation could bring results.
U.S. President Trump praised his Chinese counterpart Xi Jinping’s kind words on tariffs and automobile barriers, as Xi said he supported free trade and dialogue to resolve disputes in his speech at the Boao Forum. Xi also pledged to open China’s banking and auto manufacturing sectors.
U.S. labour Department on Wednesday reported that U.S. consumer price index fell 0.1% in the month of March after rising by 0.2% in the previous month and against the expectation of flat reading. However annual inflation rose by 2.4% while underlying inflation rose 2.1% year-on-year both largely in line with the expectations.
University of Michigan consumer sentiment index fell to a three-month low of 97.8 in April, against the expectations of a 100.6 reading.
Further, hawkish comments from Boston Fed President Eric Rosengren helped lift sentiment after he said the U.S. central bank may need to raise rates by more than what it currently expects.
Euro appreciated by 0.41% against the USD last week after European Central Bank policymaker Ewald Nowotny said on Tuesday that its time to “normalize” monetary policy. Further on Wednesday, European Central Bank President Mario Draghi said that he continues to remain confident that inflation would hit the central bank’s 2% target.
However, euro came under pressure during the later part of the week after ECB March meeting minutes showed that policymakers are concerned over the risk of a full-blown trade war with the U.S. and the potentially harmful impact of the strong euro.
Asian currencies were mixed last week against the USD. Australian Dollar appreciated by 1.04%. New Zealand Dollar appreciated by 1.40%. Japanese Yen depreciated by 0.39% against the USD and depreciated by 0.80% against the Euro. South Korean Won depreciated by 0.01%, Philippines Peso appreciated by 0.17%, Indonesian Rupiah appreciated by 0.17%, Indian Rupee depreciated by 0.37% against the USD and depreciated by 1.02% against the Euro, Chinese Yuan appreciated by 0.45%, Malaysian Ringgit depreciated by 0.21% and Thai Baht depreciated by 0.32%.