USD came under heavy selling pressure last week against major world currencies such as Japanese Yen, Euro and British Pound. Weak U.S. economic data released last week was one of the reason for the decline. However, the primary reason for USD’s aggressive slide was President Trump’s political trouble. The investigation into ties between Trump’s presidential campaign and Russian influence sparked talks of impeachment. While this may be the voice of certain sections of the market, the real implication is on the president’s ability to push through his pro-growth policies. The prospect of a Federal Reserve June rate hike that had kept the USD strong, has weakened of late and this has added more pressure on the USD. USD Index (DXY), which tracks the movement of the USD against six major currencies, fell by 2.13% on a week on week basis and is at a level of 97.14.
USD started the week on a low note after weaker than expected U.S. manufacturing data. Mid week, Washington Post published an explosive story which suggested that President Trump had provided Russian diplomats with top secret details on Middle Eastern intelligence sources. Further, the New York Times reported late Tuesday that President Donald Trump asked the then-FBI Director James Comey to shut down an investigation into the actions of former National Security Advisor Mike Flynn.
USD came under additional selling pressure after data showed that U.S. housing starts slowed unexpectedly in the month of April pointing to a slowdown in the housing market recovery. Housing starts fell by 2.6% to an annual rate of 1.17 million units, the lowest since November. Building permits fell by 2.5%.
Another report showed that U.S. industrial production rose 1.0% in the month of April, against the expectations for a 0.4% increase.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 13th May fell by 4,000 to 232,000 from previous week’s total of 236,000 against the expectations of a rise of 4,000 to 240,000.
Federal Reserve Bank of Philadelphia reported that its manufacturing index jumped to 38.8 this month from April’s reading of 22.0 against the expectation for the index to decline to 19.5.
Euro appreciated by 2.52% against the USD last week, strongest level in 6 months. The gain came largely due to broad weakness in the USD. German investor confidence rose strongly in May, the Eurozone’s trade surplus hit a 3-month high and there were no revisions to the Eurozone’s Q1 GDP and French CPI reports, which added support to the Euro.
Asian currencies were up last week against the USD due to broad weakness seen in the currency. Australian Dollar appreciated by 0.97%, New Zealand Dollar appreciated by 0.84%, Japanese Yen appreciated by 1.91% against the USD and depreciated by 0.64% against the Euro. South Korean Won appreciated by 0.05%, Philippines Peso depreciated by 0.09%, Indonesian Rupiah appreciated by 0.04%, Indian Rupee depreciated by 0.51% against the USD and by 3.11% against the Euro, Chinese Yuan appreciated by 0.21%, Malaysian Ringgit appreciated by 0.56% and Thai Baht appreciated by 0.96%.