USD continued to gain against major world currencies for the second consecutive week on heightened expectation for an early Fed rate hike, which was boosted after a string of strong economic data released last week. Easing uncertainty on the U.S. presidential election post second debate and release of FOMC minutes helped rate hike cause. The rate hike expectation will continue to drive USD higher in the coming weeks. USD Index (DXY), which tracks the movement of the USD against six major currencies, rose by 1.44% on a week on week basis and is at a level of 98.02.
Concerns related to the U.S. Presidential debate eased as analysts considered that Hillary Clinton did better than her rival Donald Trump in the second debate. Markets tend to see Clinton as a status quo candidate, while market remain unsure what Trump presidency might mean for international trade deals or the U.S. economy.
USD started the week on a high note despite the downbeat U.S. jobs report released prior to last week. The minutes of the Fed’s September policy meeting released on Wednesday showed that several voting members of the policy committee judged that a rate hike would be warranted “relatively soon” if the U.S. economy continued to strengthen.
U.S. Department of Labour on Thursday reported that number of individuals filing for initial jobless benefits in the week ended 8th October held steady at 246,000 against the expectation of a rise of 8,000 to 254,000.
Data released on Friday showed that U.S. retail sales rose 0.6% in the month of September which was in line with the expectations followed by 0.2% fall in August. Core retail sales, which exclude automobiles, rose by 0.5% in the month of September against the expectations for a 0.4% gain.
U.S. producer price index rose 0.3% in the month of September against the expectations for an increase of 0.2%. Core PPI, which excludes food and energy, rose by 0.2% in the month of September, exceeding expectations for a 0.1% rise.
University of Michigan on Friday reported that its consumer sentiment index fell to 87.9 in the month of October from 91.2 in September, disappointing expectations for a rise to 91.9.
Safe-haven demand strengthened on Thursday after data released showed that China’s trade surplus narrowed to USD 41.99 billion in the month of September from USD 52.05 billion in August against the expectation for a trade surplus to widen to USD 53.00 billion. The weak data fuelled fresh concerns over a slowdown in the world’s second largest economy.
British Pound continued to remain under pressure amid sustained concerns over a ‘hard Brexit’. However, in the mid of the week British Pound found some support after British Prime Minister Theresa May was pushed into allowing Tory MPs on Tuesday to vote for a Labour motion calling for greater scrutiny of her Brexit proposals. The motion, which demands that MPs scrutinise May’s negotiating position before she starts withdrawal talks with other EU states.
Asian currencies were largely down against the USD. Australian Dollar appreciated by 0.47%, New Zealand Dollar depreciated by 0.96%, Japanese Yen depreciated by 1.15% against the USD but appreciated by 0.94% against the Euro. South Korean Won depreciated by 1.47%, Philippines Peso depreciated by 0.28%, Indonesian Rupiah depreciated by 0.34%, Indian Rupee depreciated by 0.04% against the USD and appreciated by 1.09% against the Euro, Chinese Yuan depreciated by 0.84%, Malaysian Ringgit depreciated by 0.89% and Thai Baht depreciated by 1.27%.