USD started the week on a high note but remained shaky amid expectations that several global central banks are getting ready to tighten monetary policy. Last week the heads of the European Central Bank, the Bank of England and the Bank of Canada adopted a more hawkish view on monetary policy, indicating that they were getting ready to join the Federal Reserve in policy tightening.
USD performance last week indicates that market participants are banking on Fed Chair Janet Yellen’s continued optimism and hawkishness ahead of her semi-annual testimony before Congress this week. The 222,000 increase in nonfarm payrolls in June and the upward revision to jobs in May is enough for Yellen to maintain her credibility and justify her positive labour market assessment. The unemployment rate ticked up to 4.4% from 4.3%, as more people registered to enter the workforce. The report also showed that average hourly earnings rose 0.2% in June against the expectations for a 0.3% gain.
However, the minutes from the Federal Reserve’s latest meeting showed a lack of consensus among policymakers over the outlook for inflation and how it could impact the future pace of interest rate increases. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.40% on a week on week basis and is at a level of 96.01.
The Institute for Supply Management reported that its manufacturing activity index advanced to 57.8 last month from May’s reading of 54.9 against the expectation for a rise to 55.2.
U.S. Census Bureau reported that factory orders decreased by 0.8% in the month of May against the expectation for a decline of 0.5%.
U.S. private employers added 158,000 jobs in the month of June, well below the expectations.
The ADP National Employment Report reported that private sector payrolls increased by 158,000 jobs last month, lower than the 230,000 jobs created in May and against the expectations for a gain of 185,000.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 1st July rose by 4,000 to 248,000 from previous week’s total of 244,000 against the expectations of a fall of 1,000 to 243,000.
The Institute for Supply Management reported that its non-manufacturing activity index advanced to 57.4 last month from May’s reading of 56.9 against the expectation for a rise to 56.5.
Last week was a relatively good week for the Euro. Euro recovered from early losses to end higher against most of the major currencies and only slightly lower against the USD. The recovery path for the Euro started after the minutes of the European Central Bank’s June meeting showed that officials discussed removing the easing bias from its latest monetary policy statement, before deciding against it. Prior to last week ECB President Mario Draghi said that the factors weighing on inflation in the Euro area were mainly temporary, adding that deflationary forces are being replaced by inflationary ones which fuelled speculation that the bank could start to scale back its stimulus program as soon as September. Euro depreciated by 0.22% against USD last week.
Asian currencies were down last week against the USD. Australian Dollar depreciated by 1.14%, New Zealand Dollar depreciated by 0.71%, Japanese Yen depreciated by 1.34% against the USD and depreciated by 1.17% against the Euro. South Korean Won depreciated by 0.88%, Philippines Peso depreciated by 0.32%, Indonesian Rupiah depreciated by 0.38%, Indian Rupee depreciated by 0.02% against the USD and depreciated by 0.06% against the Euro, Chinese Yuan depreciated by 0.36%, Malaysian Ringgit depreciated by 0.19% and Thai Baht depreciated by 0.54%.