USD saw choppy trading last week as market participants were cautious ahead of Britain elections, the European Central Bank’s policy decision and former FBI director James Comey testimony to the U.S. Senate. However, USD ended the week higher after falling early in the week, largely helped by a sharp drop in the British Pound after Prime Minister Theresa May’s Conservative Party lost its parliamentary majority in national elections and former FBI director James Comey’s testimony doing little to make markets nervous. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.58% on a week on week basis and is at a level of 97.44.
USD will be supported by Fed action this week as the Fed is widely expected to hike rates.
Comey on Thursday accused President Donald Trump of firing him to try to undermine the bureau’s investigation into possible collusion between his 2016 presidential campaign team and Russia, but did not say whether he thought the president sought to obstruct justice.
U.K. Prime Minister Theresa May’s Conservative Party lost its parliamentary majority in Thursday’s general election, potentially disrupting Brexit negotiations. May faced calls to leave the government on Friday after the election left no single party with a clear claim to power just 10 days ahead of the start of Brexit negotiations. However, Theresa May said she will not be resigning and that she will seek permission from the Queen to form a new government on Friday. British Pound depreciated by 1.10% against USD last week.
USD started the week on a high note on Monday recovering from seven-month lows despite the release of weak monthly jobs report, as many market participants continued to believe that poor data will not refrain the Federal Reserve from hiking interest rates for the second time this year in its upcoming FOMC meet.
Data released on Monday showed that that activity in the U.S. service sector slowed more than expected last month and U.S. factory orders fell for the first time in five months. U.S. services PMI reading for May came in at 53.6, up from 53.1 in April against the expectation of 54. U.S. factory orders fell 0.2% in the month of April, snapping four consecutive months of gains.
The ISM non-manufacturing purchasing managers’ index fell from 57.5 in April to 56.9 last month against the expectation of 57.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 3rd June fell by 10,000 to 245,000 from previous week’s total of 255,000 against the expectations of a fall of 15,000 to 240,000.
Euro depreciated by 0.74% against USD last week after European Central Bank left its interest rates unchanged in a widely expected move. The ECB cut its forecasts for inflation this year to 1.5%, down from 1.7% in March and stated that policymakers had not discussed scaling back its massive bond-buying program.
Asian currencies were largely up last week against the USD. Australian Dollar appreciated by 1.13%, New Zealand Dollar appreciated by 0.99%, Japanese Yen appreciated by 0.07% against the USD and appreciated by 0.87% against the Euro. South Korean Won depreciated by 0.11%, Philippines Peso depreciated by 0.02%, Indonesian Rupiah appreciated by 0.18%, Indian Rupee appreciated by 0.29% against the USD and appreciated by 0.62% against the Euro, Chinese Yuan appreciated by 0.18%, Malaysian Ringgit appreciated by 0.35% and Thai Baht depreciated by 0.04%.