The US Dollar saw a bearish week with the help of Fed chairwoman Janet Yellen's dovish speech at the Economic Club of New York on Tuesday. With inflation being the biggest concern, Ms. Yellen said that further evidence was needed to gain confidence that inflation was rising. Suggesting that the Fed will take a cautious approach to the rate hikes, the Greenback fell strongly during the week while sending EURUSD to a 5-month high and AUDUSD to a 9-month high. Gold prices failed to capitalize on the gains despite posting rally of over 1.0% on Tuesday. By Friday, the much awaited nonfarm payrolls report saw the US unemployment rate rise back to 5.0% but with a 63.0% labor force participation rate in March, higher than February's 62.90%. Average hourly earnings also picked up steam, rising 0.30% and beating forecasts of 0.20%. ISM manufacturing was also robust, rising to 51.8 for the first time since October 2015 and showing that the US manufacturing sector was starting to see an expansion.
Last week also saw the GDP reports being released from Canada and the UK. Canadian monthly GDP in January increased 0.60%, beating forecasts of 0.30% by a strong margin. On an annualized basis, Canadian GDP grew at a pace of 1.50%, up from a revised 0.60% GDP growth rate in December of 2015. In the UK, GDP numbers were also positive and surprising. In the third and final revision, UK's economy expanded at a pace of 0.60%, up from 0.50% estimated previously. However, the UK’s current account deficit reached a record high of 7% of GDP.
In Japan, the alarm bells are ringing as Friday’s Tankan manufacturing and non-manufacturing surveys showed that business optimism was dropping. The week saw broadly gloomy data from Japan as retail sales fell 2.30% in February and industrial production fell 6.20% in the month, one of the largest declines since 2011. The BoJ is due to meet later this month where expectations for further expansion to the monetary base are high.
Dollar weakens as Janet Yellen outlines Fed’s gradual approach to rate hikes
Weekly Report - 03/04/2016