Oil-linked currencies such as the Russian Ruble and Canadian Dollar and the Norwegian Krone were on the back foot last week largely dragged lower by declining oil prices. Oil prices came under pressure last week and are trading at multi month low levels after increased supply from several key producers, overshadowing high compliance by OPEC and non-OPEC oil producers after a deal to cut global output. Brent Crude oil settled at USD 45.66 per barrel on 23rd June 2017, its lowest closing price since the month of July 2016. Russian Ruble depreciated by 3.06% against USD last week.
USD was largely unchanged last week and traded unevenly against all of the major currencies, largely due to the uncertainty in the minds of market participants, as they are not sure of how serious the Federal Reserve is about raising interest rates. The negative surprises in U.S. data points to a slower rather than accelerating recovery. Few of the Fed presidents who spoke last week do not seem convinced that the economy is performing well enough to warrant another round of tightening. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 0.10% on a week on week basis and is at a level of 97.26.
USD started the week on a slightly higher note after hawkish comments from a key Federal Reserve policymaker. However, part of the rise in the USD index was undoubtedly due to weakness in the British Pound, as market participants remained concerned that U.K. Prime Minister Theresa May would lack bargaining strength after her party recently lost their majority in the snap elections that she herself called in the hope of creating a “strong and stable government”. British pound depreciated by 0.51% against USD last week.
New York Fed president William Dudley gave an upbeat evaluation of the U.S. economy and warned against halting the current tightening cycle just days after the central bank hiked interest rates by 25 basis points to the current range between 1.00% and 1.25%. He also added that continued progress in the job market will push wages higher, reviving the recent slowdown in inflation. Chicago Fed President Charles Evans said on Monday that it may be worthwhile for the U.S. central bank to wait until year-end to decide whether to raise interest rates again.
Boston Fed president Eric Rosengren said on Tuesday that “monetary policy is less capable of offsetting negative shocks when rates are already low.”
Adding to the bullish side of the sentiment, both U.S. Treasury Secretary Steven Mnuchin and House Speaker Paul Ryan, prominent actors in the Republican tax reform debate, vowed that President Donald Trump would get tax reforms done in 2017.
U.S. National Association of Realtors reported on Wednesday that existing home sales increased by 1.1% in the month of May to 5.62 million units from 5.56 million units in the previous month and against the expectation for a 0.5% drop.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 17th June rose by 3,000 to 241,000 from previous week’s total of 238,000 against the expectations of a rise of 2,000 to 240,000.
U.S. Commerce Department on Friday reported that new home sales rose by 2.9% to 610,000 units in the month of May from the prior month’s reading of 593,000 against the expectation for a rise of 5.4%.
Asian currencies were down last week against the USD. Australian Dollar depreciated by 0.7%, New Zealand Dollar appreciated by 0.43%, Japanese Yen depreciated by 0.36% against the USD and depreciated by 0.28% against the Euro. South Korean Won depreciated by 0.41%, Philippines Peso depreciated by 0.49%, Indonesian Rupiah depreciated by 0.06%, Indian Rupee depreciated by 0.14% against the USD and depreciated by 0.11% against the Euro, Chinese Yuan depreciated by 0.38%, Malaysian Ringgit depreciated by 0.31% and Thai Baht appreciated by 0.01%.