USD was volatile last week amid renewed geopolitical tension in the Korean Peninsula and drop in investor expectations of a third rate hike later this year, after Federal Reserve chair Janet Yellen avoided talking about monetary policy in her speech at Jackson Hole. Fed Chair Janet Yellen offered no insight into the central bank’s thinking on future monetary policy or the timing of its balance sheet unwinding, sparking uncertainty as to whether the central bank will raise rates for a third time later this year. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.74% on a week on week basis and is at a level of 92.74.
USD started the week on a low note as U.S. political tensions continued to weigh heavily on the USD. Sentiment remained vulnerable following news on Friday that senior White House advisor Steven Bannon had been fired. Markets were also jittery after North Korea warned on Sunday that joint U.S.-South Korean military exercises set to start on Monday will be “adding fuel to the fire” of already heightened tensions with Washington and its allies.
USD came under additional pressure on Wednesday after U.S. President Donald Trump raised the threat of a government shutdown to fulfill a campaign pledge. At a rally in Phoenix, Trump referred to his vow to build a wall at the U.S.-Mexican border and said, “If we have to close down the government, we are building that wall”. He also signalled the possible termination of the NAFTA treaty with Mexico and Canada to jumpstart negotiations.
U.S. Commerce Department reported that new home sales fell by 9.4% to 571,000 units in the month of July from the previous month’s reading of 630,000 and against the expectation of a rise of 0.3% to 612,000.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 19th August rose by 2,000 to 234,000 from previous week’s total of 232,000 against the expectations of a fall by 6,000 to 238,000.
U.S. existing home sales unexpectedly fell in July. The data showed that existing home sales fell by 1.3% in the month of July to 5.44 million units from 5.51 million units and against the expectation of a rise of 0.9% to 5.57 million units.
U.S. Commerce Department reported that durable goods order fell 6.8% in the month of July against the expectation of a decline of 6%, followed by 6.4% rise in June. Core durable goods rose by 0.5% in the month of July, against the expectation of a 0.4% gain, followed by 0.1% rise in June.
Euro appreciated by 1.39% against the USD last week after survey data showed that a strong performance from the euro zone manufacturing sector this month offset slower growth in services. Markit manufacturing purchasing managers’ index rose to a two-month high of 57.4 this month up from 56.6 in July against the expectation of a reading of 56.3.
ECB President Draghi as expected by market participants did not share any new information on the central bank’s monetary policy plans in a speech at Jackson Hole but he said the Eurozone recovery is gaining momentum.
Asian currencies were largely mixed last week against the USD. Australian Dollar appreciated by 0.04%, New Zealand Dollar depreciated by 0.98%, Japanese Yen depreciated by 0.16% against the USD and depreciated by 1.53% against the Euro. South Korean Won appreciated by 1.14%, Philippines Peso appreciated by 0.74%, Indonesian Rupiah appreciated by 0.13%, Indian Rupee appreciated by 0.18% against the USD and depreciated by 0.22% against the Euro, Chinese Yuan appreciated by 0.36%, Malaysian Ringgit appreciated by 0.41% and Thai Baht depreciated by 0.06%.