Fundamental analytics

Dollar Weekly Overview 12 - 16 FEB

The dollar was trading lower in Asian hours on Monday, showing a moderate correction after rising for a almost a whole week on the back of supportive economic data and political news.

 

The US dollar index, which measures the greenback against six major currencies, was trading 0.36 percent lower at 90.01 by the time of this writing.

 

Last week, the American currency ended lower after rising for a few sessions on the back of upbeat economic data that boosted expectations for further monetary policy adjustments.

 

The dollar began the previous trading week on a stronger note, supported by the latest employment report by the US Labor Department. Data showed the economy added 200 jobs in January, while average hourly earnings rose 0.3 percent on monthly basis.

 

A solid labor market is relevant to the Federal Reserve when deciding whether to adjust or not its monetary policy configuration. Higher salaries and employed citizens are believed to increase demand of physical assets and services, which could eventually translate into inflation.

 

And higher inflationary pressure is just another point carefully monitored by members of the Federal Open Market Committee, which at the time forecast at least 3 rate hikes in 2018.

 

In the prior week, the greenback’s dynamic was dominated by the political agenda and activity indexes in the United States. The Trump administration shortly faced a second government shutdown as one Republican senator blocked a bipartisan two-year budget deal.

 

However, the House was able to give a green light to the agreement on Friday, putting an end to the shutdown and pushing the bill to President Donald Trump’s desk for his signature.

 

The deal is meant to boost military and domestic infrastructure spending, for which there would be $300 billion plus in the pot. An additional $90 billion were also included for natural disasters following the recent tropical storms that heavily damaged oil production areas across the US.

 

On the data front, the dollar found support on activity indexes by the Institute for Supply Management. The ISM non-manufacturing PMI for January came in at 59.9 from a prior reading of 55.9 points, the highest score since mid-2005.

 

The dollar remained on a volatile position tough, which could be simply related to the massive sell-off seen in world stock markets and a clearly weak sentiment among investors. Risk assets only recovered in the second part of the week.

 

In the next few days, market participants will be paying attention to inflation data due on Wednesday, as well as industrial production figures on Thursday and a batch of data from the real estate market set for publishing on Friday.

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