USD Recovers to End its Losing Streak | Market Outlook, Feb 5, 2018

Market Outlook

USD Recovers to End its Losing Streak

Last week ended with the dollar moving higher on Friday following the US jobs data indicating that hiring activity and wage growth were bullish in January, paving the way for swifter rate increase by the Fed this year.

The U.S. dollar index climbed up 0.63% to 89.04 in subsequent trade.

The U.S. central bank left rates untouched during the previous week but stated that it expected inflation to increase in 2018, amid speculations that borrowing expenses will continue to mount. The Fed has forecasted three rate hikes for 2018.

The dollar plummeted 3.1% in January amid predictions that other global central banks, including the ECB, may constrict fiscal policy quicker than anticipated and dampened its comparative lure of profits for investors.

The dollar soared against the euro ensuing the jobs report, with EUR/USD dropping 0.46% at 1.2455 late on Friday.

The dollar also rose against the yen, with USD/JPY increasing 0.69% to 110.16.

Sterling slumped to the day’s lows against the USD, with GBP/USD falling 1.09% to 1.4112.

Meanwhile, Gold dived on Friday as the USD recovered following the recent U.S. jobs data. Gold futures for April delivery was down 0.91% at $1,335.70 on the Comex division of the New York Mercantile Exchange. Prices of the precious metal have dropped after reaching their peak since August 2016 on January 26 as the USD improved and Treasury yields have increased. For the week, prices dived 1.47%. A robust USD makes gold dearer for overseas investors.

Oil prices ended lower on Friday to total a loss for the week, as traders considered a slow increase in U.S. output in the backdrop of OPEC's endeavours to reduce excess supplies.

U.S. West Texas Intermediate (WTI) crude futures for March delivery went down 35 cents, or around 0.5%, to end at $65.45 a barrel.

Also, April Brent crude futures, the standard for oil prices outside the U.S., fell $1.07, or about 1.5%, to end at $68.58 a barrel. The contract touched a more than three-week nadir of $67.96 previously in the session.

In the week ahead, investors will avidly await any news from Washington over the country’s finances ahead of the Feb. 8 spending deadline.

In what is set to be a fairly less-hectic week on the economic calendar, central bank meetings in the UK, Australia and New Zealand will attract investors’ attention.

The Bank of England (BoE) will declare its rate decision at 1200GMT (7:00AM ET) on Thursday. The central bank will also present its quarterly inflation report simultaneously.

China is to publish January trade statistics at around 0300GMT on Thursday. The report is likely to point out that the country’s trade boom shrunk a bit to $54.0 billion the previous month from an excess of around $54.7 billion in December. China's economy thrived 6.8% in the fourth-quarter from a year earlier, aided by an improvement in the industrial sector, a buoyant property market and positive export growth.

In other news, the week will draw to a close with Canada releasing the January employment numbers at 8:30AM ET (1330GMT) Friday.

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