USD came under pressure last week as concerns over President Donald Trump’s protectionist policies dominated market sentiments. In the first week of Donald Trump’s Presidency, market participants got a taste of how committed he is to the promises made during his campaign. On Monday, Trump formally withdrew the U.S. from the Trans-Pacific Partnership trade accord and also said that he intends to renegotiate the North American Free Trade Agreement between the U.S., Canada and Mexico. On Wednesday, Trump gave the go-ahead for construction of a U.S.-Mexican border wall and punishment for cities shielding illegal immigrants. Trump is also expected to sign an executive order to block the entry of refugees from Syria and suspend the entry of any immigrants from Muslim-majority Middle Eastern and African countries.
USD started the week on a low note as concerns over lack of clarity on Trump’s economic policies weighed on the currency market and fears that his protectionist stance could hit corporate profits and will act as a drag on growth. USD Index has climbed around 3% since Trump’s election win in November largely backed by the expectations that cut in taxes and hike in infrastructure spending would spur growth in the U.S. economy, which will lead to higher inflation and faster pace of interest rate hikes. The index has fallen by more than 2% so far this month.
USD pared some of its losses in the later part of the week despite the release of disappointing U.S. economic data as market participants started to bet on the expectation that the combination of tax cuts and tough trade policies by President Trump will drive U.S. economy growth.
U.S. Commerce Department on Thursday reported that new home sales fell by 10.4% to 536,000 units last month against the expectations for a 1.0% drop to 588,000 units.
U.S. Department of Labour on Thursday reported that the number of individuals filing for initial jobless benefits in the week ended 21st January rose by 22,000 to 259,000 from previous week’s total of 237,000 against the expectation of a rise of 13,000 to 250,000.
U.S. Bureau of Economic Analysis on Friday reported that U.S. gross domestic product grew by 1.9% in the fourth quarter of 2016 against the expectations for 2.2% followed by 3.5% growth rate seen in third quarter.
U.S. Census Bureau reported that U.S. durable goods orders fell 0.4% in the month of December against the expectations for a 2.6% gain. Core durable goods orders rose by 0.5% in the month of December which was largely in line with the expectations.
University of Michigan reported that its consumer sentiment index rose to 98.5 in the month of January, up from a preliminary reading of 98.1 and compared to expectations for 98.1.
British Pound was the best performing currency against the USD as it appreciated by 1.45% last week after data showed that Britain’s economy expanded at a faster-than-expected rate in the fourth quarter. U.K. Office for National Statistics on Thursday reported that gross domestic product grew by 0.6% in the three months to December against the expectation of 0.5% followed by same reading seen in the previous quarter. On an annual basis, the economy grew by 2.2%, slightly faster than the 2.1% growth expected. However, Pound came under slight pressure after British Supreme Court ruling that the government will need parliamentary approval before triggering the process to exit the European Union.
Euro depreciated by 0.04% against USD last week as data released last week was negative with the ZEW survey of investor confidence falling short of expectations while the German composite PMI index and IFO business sentiment fell in the month of January.
Asian currencies were mixed last week against the USD. Australian Dollar depreciated by 0.05%, New Zealand Dollar appreciated by 1.24%, Japanese Yen depreciated by 0.42% against the USD and by 0.36% against the Euro. South Korean Won depreciated by 0.16%, Philippines Peso appreciated by 0.27%, Indonesian Rupiah appreciated by 0.38%, Indian Rupee appreciated by 0.21% against the USD and depreciated by 0.36% against the Euro, Chinese Yuan depreciated by 0.11%, Malaysian Ringgit appreciated by 0.38% and Thai Baht appreciated by 0.25%.