USD saw choppy trading last week as market participants were cautious ahead of FOMC meet, announcement of new Fed chief, unveiling of U.S. Tax bill and series of economic data. However, USD ended the week higher after falling early in the week, largely helped by a string of positive U.S. economic data and President Donald Trump’s nomination of Federal Reserve Governor Jerome Powell to be the next Fed chair, which indicates the continuation of Janet Yellen current monetary policy regime. The string of positive U.S. economic data released last week boosted the sentiment for the U.S. economy and increased the likelihood of a rate hike by the Fed in its December monetary policy review.
USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.03% on a week on week basis and is at a level of 94.94.
USD started the week on a low note on Monday despite the release of strong third quarter GDP data as market participants took profit ahead series of events.
GDP data showed that the U.S. economy expanded by 3.0%, beating expectations of 2.5%. 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.
The Fed in its recently concluded FOMC meet left interest rates unchanged as widely expected but solidified expectations for a year-end rate hike by highlighting “solid” economic growth and a strengthening labour market.
House Republicans released a tax-reform bill on Thursday that would cut the corporate tax rate to 20% from 35%. The USD after the announcement was boosted by hopes that tax reform could increase growth and pressure the Federal Reserve to raise interest rates.
U.S. Commerce Department reported on Monday that personal spending rose more than expected last month.
The personal consumption expenditures (PCE) price index excluding food and energy, rose 1.3% in the 12 months through September. That was largely in-line with the expectations but well below the Fed’s 2% target, fuelling expectations that the trend of subdued inflation will keep interest rates lower for longer.
The Commerce department on Monday reported that U.S. consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1% last month.
U.S. economy remained bullish as consumer confidence rose to its highest level since 2008 while economic activity in the Chicago area jumped to a six-and-a-half year high in October. Data released showed that the consumer index rose to 125.9 in the month of October from 119.8 in September against the expectation for a reading of 121.
The Chicago Purchasing Managers’ Index (PMI) rose to 66.2 in October from September reading of 65.2 against the expectation for a reading of 61.
Institute of Supply Management reported on Wednesday that the U.S. manufacturing sector’s growth slowed last month. Data shows that the Institute for Supply Management’s index posted a reading of 58.7 in October against the expectations for a reading of 60.
The ADP National Employment survey reported on Thursday that private employers added 235,000 jobs in the month of October against the expectations for 200,000.
Non-farm payrolls (NFP) rose 261,000 in the month of October, compared to the addition of just 18,000 jobs in September when Hurricanes Harvey and Irma took their toll on the U.S. economy. However, the strong number still missed the expectation of 310,000 job addition in October.
The strong jobs rebound seems to fit with the Fed’s assessment on Wednesday that “the labour market has continued to strengthen, and that economic activity has been rising at a solid rate despite hurricane-related disruptions.”
The services sector expanded more than expected, with the non-manufacturing purchasing manager’s index rising to 60.1 in the month of October from the previous month’s reading of 59.8 and against the expectation of 58.5. This represents the highest reading for the service sector index since 2005.
British Pound depreciated by 0.39% against USD last week despite Bank of England raising interest rates for the first time in a decade on Thursday, but said that any further hikes would be at a gradual pace and to a limited extent. The BoE also warned that Britain’s decision to leave the European Union is having a “noticeable impact on the economic outlook”.
Asian currencies were largely higher last week against the USD. Australian Dollar depreciated by 0.35%, New Zealand Dollar appreciated by 0.42%, Japanese Yen depreciated by 0.35% against the USD and depreciated by 0.34% against the Euro. South Korean Won appreciated by 1.49%, Philippines Peso appreciated by 1.13%, Indonesian Rupiah appreciated by 0.82%, Indian Rupee depreciated by 0.78% against the USD and appreciated by 0.52% against the Euro, Chinese Yuan appreciated by 0.17%, Malaysian Ringgit appreciated by 0.13% and Thai Baht appreciated by 0.15%.