USD dropped last week, as market participants took profits on their long USD positions ahead of Fed’s FOMC meeting this week. The expectation for a rate hike this week has risen sharply post Friday’s February job numbers. Several Fed officials too have given hawkish guidance on policy, which has been backed by positive data released in the recent past.
U.S. jobs report for February showed that the labour market is continuing to show strength. U.S. economy added more than expected 235,000 jobs in the month of February beating the expectation for an addition of 200,000 followed by 238,000 job additions in January. The number of unemployed persons was at 7.5 million, almost unchanged month on month. The U.S. unemployment rate ticked down to 4.7% in the month of February from 4.8% in the previous month, which was largely in line with the expectation and is down from 4.9% a year earlier. The report also showed that average hourly earnings rose 0.2% last month, compared to expectations for an increase of 0.3%.
USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 0.29% on a week on week basis and is at a level of 101.25.
USD started the week on a high note after it recovered from one-week lows as the Euro was hit by the ongoing uncertainty over the outcome of the French presidential election, along with the higher expectations for a Fed rate hike after Fed Chair Janet Yellen said last week that a rate hike “would likely be appropriate” this month if employment and inflation continued to evolve in line with expectations. The Euro came under pressure after former French Prime Minister Alain Juppe, the most likely candidate to replace scandal-hit French presidential hopeful Francois Fillon, ruled himself out of the race.
U.S. Commerce Department reported that the U.S. trade deficit increased by 9.6% to USD 48.5 billion in the month of January, the highest level since March 2012 and in line with expectations. Deficit was USD 44.3 billion in December.
Payroll processor ADP reported that the U.S. private sector added 298,000 jobs in the month of February against the expectation for an increase of 190,000. It was the largest increase in private sector hiring since March 2006 followed by an increase of 261,000 jobs in January.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 4th March rose by 20,000 to 243,000 from previous week’s total of 223,000 against the expectation of a rise of 12,000 to 235,000.
Euro appreciated by 0.48% against USD last week. Euro in the early part of the week came under pressure on uncertainty over the outcome of the French presidential elections. However, Euro recovered after ECB kept interest rates unchanged last week, which was in line with expectations and ECB president Mario Draghi reiterated that interest rates can be cut again in the future if necessary.
British Pound depreciated by 1.01% against USD last week after weak consumer spending data underlined concerns that the economy is faltering as it prepares to exit the EU. The upcoming week could bring in lot of volatility to the British Pound amid Bank of England’s monetary policy announcement, U.K. employment numbers and the possible trigger of Article 50.
Asian currencies were largely mixed last week against the USD. Australian Dollar depreciated by 0.71%, New Zealand Dollar depreciated by 1.54%, Japanese Yen depreciated by 0.65% against the USD and by 1.14% against the Euro. South Korean Won depreciated by 0.1%, Philippines Peso appreciated by 0.2%, Indonesian Rupiah appreciated by 0.05%, Indian Rupee appreciated by 0.30% against the USD and depreciated by 0.32% against the Euro, Chinese Yuan depreciated by 0.08%, Malaysian Ringgit appreciated by 0.03% and Thai Baht depreciated by 0.84%.