USD started the week on a high note amid contrasting monetary policy outlook between the Federal Reserve and the Bank of Japan. However, USD ended the week in negative territory largely due to the concern over the fate of a highly-anticipated U.S. tax reform bill and political turmoil in the Middle East, which fuelled safe haven demand. Adding to the USD weakness was uncertainty over the leadership of the Federal Reserve after the Federal Reserve Bank of New York confirmed that William Dudley was preparing to retire earlier than planned in mid-2018 rather than when his term ends in January 2019. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.58% on a week on week basis and is at a level of 94.39.
U.S. Senate Republicans unveiled a tax plan on Thursday, which would reduce the corporate tax rate to 20% from 35% and make other significant changes to the individual tax system. However, investors turned cautious as Senate Republican leaders said that they were considering postponing the implementation of the major corporate tax cut until 2019.
Although tax-reform developments will continue to dominate the headlines, the USD performance in the coming week will be driven by 6 Federal Reserve President speeches schudled in the coming weeks. Retail sales and consumer prices are also scheduled for release and market participants will be eager to see if last month’s sharp increase in jobs translated into more spending.
On Monday USD rose to its highest level in eight months against the Yen. BoJ Governor Haruhiko Kuroda said on Monday that BoJ will continue with its monetary easing policy but added that the bank was closely watching the economic effects of prolonged stimulus. Whereas, the demand for the USD continued to be underpinned by expectations that the Fed will stick to its plan for gradual monetary tightening
U.S. Labour Department’s reported Job Openings and Labour Turnover Survey (JOLTs) on Tuesday, a measure of labour demand, which showed job openings in the month of September improved to about 6.1 million, against the expectations of 6.091 million.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 4th November rose by 10,000 to 239,000 from previous week’s total of 229,000 against the expectations of a rise by 2,000 to 231,000.
University of Michigan’s consumer sentiment index showed consumer confidence in the economy cooled, as the index printed at a preliminary reading of 97.8 for November, missing expectations for a reading of 100.7.
Euro appreciated by 0.49% against the USD last week as latest economic reports showed that the Eurozone economy is performing quite well and comments from European Central Bank officials have been less pessimistic. Euro zone retail sales, producer prices, German factory orders, the trade balance and current account balance were all better than expected. The only report that missed expectations was German industrial production, which tanked to -1.6% in the month of September from 2.6% rise in August.
Asian currencies were mixed last week against the USD. China reported its trade balance for October at USD 26.62 billion, narrower compared to the expectation of USD 39.50 billion surplus. The imports jumped by 17.2%, above the 16% increase expected, while exports rose 6.9%, below the 7.2% expectation.
Australian Dollar appreciated by 0.14%, New Zealand Dollar appreciated by 0.43%, Japanese Yen appreciated by 0.48% against the USD and appreciated by 0.02% against the Euro. South Korean Won depreciated by 0.29%, Philippines Peso depreciated by 0.14%, Indonesian Rupiah depreciated by 0.33%, Indian Rupee depreciated by 0.95% against the USD and depreciated by 0.96% against the Euro, Chinese Yuan depreciated by 0.03%, Malaysian Ringgit appreciated by 1.07% and Thai Baht appreciated by 0.18%.