Forex - Weekly outlook: 02.05 - 02.09
The dollar rose on Friday after the latest U.S. jobs report showed that hiring remained robust and wage growth accelerated in January, bolstering expectations for a faster pace of rate hikes by the Federal Reserve this year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.63% to 89.04 in late trade.
The U.S. economy created 200,000 new jobs last month, the Labor Department reported and the unemployment rate remained steady at a 17 year low of 4.1%.
The report also showed that U.S. average hourly earnings rose 0.3% during the month and 2.9% from a year earlier, the most since 2009.
The uptick in wage growth boosted the outlook for inflation and underlined the case for the Fed to raise interest rates at a faster pace this year.
Expectations of tightening monetary policy tend to boost the dollar, as rising rates make the currency more attractive to yield-seeking investors.
The U.S. central bank left rates unchanged last week but said it anticipated inflation would likely rise in 2018, underlining expectations that borrowing costs will continue to increase. The Fed currently projects three rate hikes for this year.
The dollar fell 3.1% in January as expectations that other world central banks, including the European Central Bank, may tighten monetary policy faster than expected eroded its relative yield attraction for investors.
The dollar rose against the euro following the report, with EUR/USD down 0.46% at 1.2455 late Friday.
The dollar also gained ground against the yen, with USD/JPY climbing 0.69% to 110.16.
Sterling fell to the day’s lows against the greenback, with GBP/USD down 1.09% to 1.4112.
In the week ahead, investors will be looking to political wrangling in Washington over the country’s finances ahead of the Feb. 8 spending deadline and the debt ceiling issue.
In what is set to be a relatively light week on the economic calendar, central bank meetings in the UK, Australia and New Zealand will also be in focus.
Monday, February 5
China is to publish its Caixin services index.
The UK is to release data on service sector activity.
In the U.S., the Institute for Supply Management is to publish its manufacturing index.
Later Monday, ECB head Mario Draghi is to testify on the central bank’s Annual Report for 2016 before the European Parliament.
Tuesday, February 6
Australia is to release data on trade and retail sales. Meanwhile, the Reserve Bank of Australia is to announce its benchmark interest rate and publish a rate statement which outlines economic conditions and the factors affecting the monetary policy decision.
Both Canada and the U.S. are to produce trade data; Canada is also to report on the Ivey manufacturing index.
Wednesday, February 7
New Zealand is to publish its jobs report for the fourth quarter.
The UK is to release industry data on house price inflation.
Canada is to produce a report on building permits.
New York Fed President William Dudley is to speak at an event in New York.
Thursday, February 8
The Reserve Bank of New Zealand is to announce its benchmark interest rate and publish its rate statement. The announcement is to be followed by a press conference.
Australia is to release a report on business confidence.
China is to publish data on trade.
The Bank of England is to announce its latest monetary policy decision and publish its quarterly inflation report.
Canada is to report on new house price inflation.
The U.S. is to publish the weekly report on initial jobless claims.
Friday, February 9
China is to release inflation data.
The UK is to release data on trade and manufacturing production.
Canada is to round up the week with its latest employment report.