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U.S. stocks were higher while the dollar dipped after the close on Friday. At the close in NYSE, the Dow Jones Industrial Average gained 0.94%, the S&P 500 index added 0.73%, and the NASDAQ Composite index jumped 0.54%.
U.S. President Donald Trump on Friday signed executive actions that ask the Labor Department to review whether the fiduciary rule signed under the Obama era needs to be changed or dumped, and the framework for scaling back Dodd-Frank financial regulations.
Those orders were considered to as a gift to Wall Street and in line with that view, stocks traded higher.
The U.S. dollar, on the other hand, weighed down by the latest U.S. employment report which showed jobs growth beat expectations, but wage growth remained tepid. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.14% at 99.69 late Friday. For the week the index was down 0.69%, its sixth consecutive weekly decline.
According to the Labor Department, the U.S. economy added 227,000 jobs in January from the prior month, smashing forecasts by economists that expected nonfarm payrolls rose by 175,000 last month. However, as more Americans joined the workforce, the unemployment rate ticked up to 4.8% from 4.7% in December. Average hourly earnings only added 2.5% in January from a year earlier, slowing from 2.8% in December, which may prompt the Federal Reserve to adopt a more cautious approach on raising interest rates this year.
Earlier in the week, the Fed on Wednesday gave no clear signal on the timing of its next rate hike although it stated that the economy is strengthening. The U.S. central bank stuck to the uncertainties resulted from possible economic impact of the Trump administration’s protectionist policies and recent remarks about currencies.
In the week ahead, the U.S. dollar wagers are likely to pay attention on releases such as the trade balance due on Tuesday and the University of Michigan Consumer Sentiment Index on Friday. Besides, Trump’s policies, comments and the views of Fed Presidents Harker, Bullard and Evans will remain market movers for the currency.
The Japanese Yen ended the week higher despite some losses on early Friday. The pair USDJPY closed the Friday’s session down 0.13%, contributing to a weekly decline of 1.75% – the worst weekly performance since late June. The Bank of left monetary policy unchanged after its two-day meeting at the beginning of the week but on Friday, it sent the Yen tumbling on plans to buy an unlimited amount of 5-10 year of JGBs. As stated by BoJ Governor Kuroda, the move was in order to “hit CPI target as soon as possible”.
The dollar lost ground to all of its peers except for the British Pound. Sterling came under pressure after data on Friday extended the disappointment stemming from economic reports released earlier in the week. Latest economic reports showed manufacturing, service and construction activity slowed while consumer credit dropped last month, suggesting early negative effects of Britain’s decision to leave the European Union.
Beside data, the Bank of England’s cautious outlook on the domestic economy also dragged down the currency. Although the BOE raised its forecasts for GDP significantly, it kept its inflation forecast unchanged and seemed cautious about raising interest rates. BOE Governor Mark Carney stated that “the Brexit journey is really just beginning. While the direction of travel is clear, there will be twists and turns along the way.” Investors were disappointed by his cautious tone and sent sterling tumbling as a result.
The U.K. trade balance and data on manufacturing production and trade which are both due to release on Friday are the only pieces of market-moving data on the U.K. calendar this coming week.
All three of the commodity currencies traded higher against the greenback this past week with the Aussie named the top gainer.
Australia is to release data on retail sales on Monday before the Reserve Bank of Australia announces its monetary policy on the next day and publishes its monetary policy statement on Friday. The RBA is widely expected to leave interest rates unchanged and maintain a neutral monetary policy stance.
The Reserve Bank of New Zealand also has a monetary policy meeting on the calendar next week. Like Australia’s central bank, the RBNZ is anticipated to leave its policies on hold on Wednesday. Before that, New Zealand is to release a report on inflation expectations on Tuesday.
Canada dollar remained strong against its American counterpart last week, supported by stronger GDP growth and steady oil prices. Canada is to release reports on trade, building permits and business activity on Tuesday, followed by the publication of monthly employment report on Friday.