USD ended higher last week on healthy jobs data and expectations of tax reform to get done by December end. Fed is expected to hike interest rates this month while guidance on pace of rate hikes will be key for USD going forward. Fed Fund Futures suggest that market expects 98% probability of a 25 bps rate hike in Fed’s December policy meet. US Core PCE Index, Fed’s preferred gauge of inflation, rose by 1.4% in October 2017 but remains below Fed’s 2% target.ECB and Bank of England rate decisions are also awaited this week.
USD Index (DXY), which tracks the movement of the USD against six major currencies, rose 1.10% on a week on week basis and is at a level of 93.90.
The U.S. Bureau of Labor Statistics reported jobs numbers for November, which showed total nonfarm payroll employment increased by 228,000 in November and the unemployment rate was unchanged at 4.1%. Professional and business services, manufacturing and health care posted uptrend in employment. Wage growth was weaker at 0.2% month on month.
The ISM’s non-manufacturing PMI(Purchasing managers index) for November was at 57.4 against October reading of 60.1, below market expectations.
GDP data showed that in the July-September period, U.S. economy expanded by 3.3%, beating expectations of 3.2% growth. The quarterly growth was the first time since 2014 that the U.S. economy has experienced growth of 3% or more for two quarters in a row.
Euro and GBP depreciated by 0.82% and 0.65% respectively against the USD last week, as the European Union and UK government entered into the 2nd phase of Brexit talks, indicating it could be tougher than previous round. Key issues such as Irish Border is still unaddressed leaving investors worried. In Germany, efforts to form coalition government is still in process, Angela Merkel will hold talks to form a government next week.
China November 2017 imports and exports rose 17.7% and 12.3% in USD terms, above market expectations. Japan Q3 GDP rose by 2.5% yearly due to strong business investment and rising consumer demand. Asian currencies were mixed last week against the USD. Australian Dollar depreciated by 0.24%, New Zealand Dollar depreciated by 0.13%, Japanese Yen depreciated by 0.16% against the USD and depreciated by 0.58% against the Euro. South Korean Won depreciated by 0.11%, Philippines Peso appreciated by 0.79%, Indonesian Rupiah depreciated by 0.14%, Indian Rupee appreciated by 0.37% against the USD and appreciated by 0.57% against the Euro, Chinese Yuan depreciated by 0.22%, Malaysian Ringgit appreciated by 0.62% and Thai Baht appreciated by 0.14%.