USD ended last week lower against major world currencies as U.S. political uncertainty dominated financial markets. Donald Trump’s press conference on Wednesday failed to offer details on the promises made during the campaign to boost fiscal spending and cut taxes. However, U.S. economic data released during the week and Federal Reserve Chair Janet Yellen upbeat remark on U.S. economic and labour market recovery underpinned the expectation of rate hikes, which lent support to the USD in the later part of the week. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 1.02% on a week on week basis and is at a level of 101.18.
Donald Trump on Wednesday failed to address economic and fiscal policies in his first formal news conference as U.S. president-elect. Trump disappointed markets as there were expectations that he would outline in more detail his proposed plans for fiscal stimulus, infrastructure spending and tax reforms. Instead, the U.S. president-elect criticized U.S. intelligence agencies and the pharmaceutical industry. USD Index had gained 4% since Trump’s election victory largely on the expectations that his promised policies would boost inflation and encourage the Federal Reserve to raise interest rates.
USD started the week on a higher note as the U.S. jobs report for December supported the case for rate hikes, although the report showed that monthly job addition remained short of expectation, but the annual rate of wage growth rose to 2.9% in the month of December from a year earlier, the strongest since 2009.
Boston Federal Reserve President Eric Rosengren on Monday said that the U.S. central bank must step up the pace of its interest rate hikes from once-a-year pattern it has exhibited since 2015 and warned that inflation could overshoot Fed target if it does not. At a separate event Atlanta Fed President Dennis Lockhart said that it is too early to judge how the incoming Trump administration may change the path of the economy.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 7st January rose by 10,000 to 247,000 from previous week’s total of 237,000 against the expectation of a rise of 20,000 to 257,000.
U.S. Census Bureau on Friday reported that retail sales rose by 0.6% in the month of December followed by 0.1% rise in November and against the expectations of a rise of 0.7%. Core retail sales rose by 0.2% in the month of December against the expectations of a rise of 0.5%.
U.S. producer price index edged higher by 0.3% in the month of December which was largely in line with the expectations after rise of 0.4% in November. On yearly basis, producer prices increased 1.6%, which again was in line with the expectation.
British Pound came under selling pressure last week after British Prime Minister Theresa May on Sunday said that the country would not be keeping “bits” of European Union membership, which was seen as an indication that the U.K. won’t try to negotiate continued full access to the European single market when it leaves the EU. British Pound depreciated by 0.85% against USD last week.
Euro appreciated by 1.05% against USD last week. Euro last week gained not only because of USD weakness but also due to the stronger-than-expected industrial production activity in the Eurozone. Data showed that industrial output rose by 1.5% on a monthly basis and 3.2% on yearly basis, both figures were far better than expected.
Asian currencies were largely up last week against the USD. Australian Dollar appreciated by 2.75%, New Zealand Dollar appreciated by 2.46%, Japanese Yen appreciated by 2.21% against the USD and by 1.13% against the Euro. South Korean Won appreciated by 1.53%, Philippines Peso depreciated by 0.46%, Indonesian Rupiah appreciated by 0.25%, Indian Rupee depreciated by 0.28% against the USD and by 0.85% against the Euro, Chinese Yuan appreciated by 0.11%, Malaysian Ringgit appreciated by 0.21% and Thai Baht appreciated by 0.86%.